View more on these topics

FCA looks at consumer biases when buying financial products

<!–
<!–
<!–

–>
–>
–>

FCA logo original size

The Financial Conduct Authority has set out how it can learn from the mistakes consumers make when buying financial products to improve the way it regulates firms.

The regulator has published two papers on behavioural economics, the first of which looks at how consumer biases can lead to a lack of market competition. The second paper looks at a case study of how consumers can be encouraged to respond to customer redress letters.

In the first paper, the FCA says consumer biases such as an individual’s excessive self-belief when it comes to stock picking, and following financial advice because “an adviser is likeable” can cause problems which can be exacerbated by the way products are designed, sold and marketed.

It wants to use behavioural economics to intervene to protect consumers where necessary, such as by requiring firms to provide information in a certain way, controlling product distribution and potentially banning products altogether.

In the second paper, the FCA worked on a real case with an unnamed firm that was voluntarily writing to around 200,000 customers to offer redress due to a failure in its sales process.

redress

The regulator found that varying the way the redress letter was formatted could improve the response rate from 1.5 per cent to 12 per cent, equivalent to an extra 20,000 people responding to the letter.

The changes included making bullet points more relevant, stripping out text and explaining the claims process would only take five minutes.

The FCA says it will use insights on behaviour to develop policy, analyse firms’ business models and build evidence for enforcement cases.

Aurora Financial Planning chartered financial planner Aj Somal says: “This kind of outside the box thinking is refreshing, particularly as it is coming from the regulator.”

Recommended

NMBA launches adviser apprentice scheme

SimplyBiz’s training arm New Model Business Academy has launched an A-level entry school leavers apprenticeship programme with the Babington Business College. The apprenticeships last for 12 months and include the Chartered Insurance Institute financial administration exam, a national vocational qualification in providing financial services and a certificate in customer service. Adviser firms can apply through […]

4

Skandia to re-enter critical illness market

Skandia is re-entering the critical-illness market more than two and a half years after it pulled out of the sector. The provider is expected to announce details of its new offering within the next few weeks. Money Marketing revealed the provider was considering re-entering the CI sector in February 2012. In July 2010, Skandia announced […]

6

Aviva to cut 2,000 jobs

Aviva is to cut 2,000 jobs across the group in the UK, Europe and Asia as part of a cost cutting drive. Staff were informed of the move today. It is not known at this stage how many affected roles are UK-based. The job cuts, which equate to 6 per cent of Aviva’s global workforce, […]

Ricci and Kalaris to leave Barclays

Barclays head of investment banking Rich Ricci and wealth management chief Tom Kalaris are leaving the business. Ricci and Kalaris, who played key roles under former Barclays chief executive Bob Diamond, will leave the banking group on 30 June. Barclays has appointed Eric Bommensath and Tom King as co-chief executives of corporate and investment banking […]

Three catalysts for European equities

By Rob Burnett, Manager of the Neptune European Opportunities Fund In recent weeks, the bear case for European equities has become more pronounced on the back of weaker-than-expected GDP data and deflation concerns. This softening in economic momentum has led some investors to question whether the ECB is behind the curve and indeed whether it […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    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

    Email: customerservices@moneymarketing.com