Labour MP Angela Eagle has blamed product providers for creating “market failure on a massive scale” in the financial services sector and damaging consumer confidence.
Speaking at a Treasury select committee hearing on restoring confidence in long-term savings last week, Eagle told witness Ron Sandler she blames providers for perpetuating an atmosphere of mistrust in financial services.
Sandler replied that he is disappointed the industry has not seen his new product range as a commercial opportunity and that provider response had been clouded by concerns over the price cap.
Eagle accused providers of a “shortsighted” resistance to see areas of the market where 1 per cent could work. She is calling for the FSA to look more closely at restructuring the entire system to make advice less product-driven and commission-driven.
Sandler criticised the FSA for “watering down” suggestions in his report and warned there is a danger that the regulator would become too rooted in the idea of regulating the sales process and seek to impose more stringent controls.
Despite the FSA's ann-ouncement last week that implementation of the Sandler range had been put back to May or June, Sandler said he could see no wavering in the Government's commitment to the initiative.
Eagle said: “There is horrendous complexity in the market and it is clearly not working well. There needs to be a break-out somewhere rather than persisting with narrow-ing markets, with consumers becoming more negative bec-ause of misselling. We are obsessing in the wrong areas rather than moving to restructure.”
Sandler said: “The FSA is concerned with preventing consumer detriment. This is where the FSA and I diverge in trying to make industry more efficient by empowering consumers. That is not the concern of the FSA and an important consideration when we consider intervening in the industry.”