View more on these topics

FCA concern over distributors’ ‘complex charging structures’

Martin Wheatley BBA Conference 2012 480

The Financial Conduct Authority has raised concerns over distributors’ use of “complex charging structures” when selling long-term investment and pension products.

In its first annual risk outlook, the FCA, which comes into force next week, says it has concerns about charging structures in “highly intermediated” markets.

It says: “Complex and often highly intermediated distribution chains mean that different market participants are able to extract fees and charges from consumers at multiple points − a fact that is often unclear to the end user at the point of sale.

“Increasingly complex charging structures – driven in part by pressure on firms from declining markets and changing consumer behaviours – have generated important new revenue streams for many firms. In some cases, these have also been accompanied by lower levels of transparency on products and pricing.

“In addition, disclosures on fees and charges for long-term investment products such as pension and long-term savings products, can mislead consumers on the life-time costs of the product. This could in turn lead to inappropriate product choices, with serious implications.”

The FCA says consumers need to place a significant amount of trust in firms at the point of sale but cannot judge the quality of their advice for years to come when it may be too late.

The regulator adds that firms may fail to take on core responsibilities such as treating customers fairly or making them aware of their rights under the Financial Services Compensation Scheme.

The regulator also warns about certain firms creating “situational monopolies” that leave consumers with little knowledge over whether or not they need a product.

FCA risk outlook


News and expert analysis straight to your inbox

Sign up


There are 2 comments at the moment, we would love to hear your opinion too.

  1. Perhaps the FCA might like to look at its own charges. It is almost impossible to work out what regulatory fees will be and, of course, the FSCS levies are almost random.

    How are firms supposed to budget?

    When you have an unending liability for claims and to an unaccountable regulator, maybe you need to ensure that your own income streams are strong.

    Maybe when the regulator applies TCF to those it regulates the industry will be able to apply it to its clients.

  2. “Situational monopolies”

    Good grief. What does that mean?

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm