The FCA has rejected calls for a review to simplify documents at the point of sale, laying the responsibility on firms to set the way they communicate to clients.
In response to a proposal from platform and Sipp provider AJ Bell to streamline client documents, the regulator agreed such documents can confuse customers, but won’t immediately act on the issue.
In July, AJ Bell chief executive Andy Bell wrote to FCA director of strategy and competition Christopher Woolard calling for a “root and branch” review of the complexity and length of disclosure documents clients receive at the point of sale.
According to Bell, usual paperwork including suitability reports and key investor information documents that can often run over 30 pages.
In the letter, Bell argued savers and investors are being deluged with paperwork when they come to taking out a financial product.
He said “the FCA should be bold” and challenge the industry to get most of the necessary investor information onto a single page document.
In the FCA response dated 3 August and released today, Woolard said it is for firms and not the FCA to decide how they communicate with consumers.
Woolard says: “This includes making disclosures as engaging for consumers as possible, and incorporating them effectively into the overall customer journey.”
The regulator says it will continue to work on disclosure rules and consider a broader review only if there is a “clear case of consumer harm” and will only make “iterative” improvements to point of sale rules where there is consumer benefit.
However, the FCA intends to publish further “non-handbook guidance” on effective consumer communication later this year. It will also consider disclosure as part of the proposals it outlined in its asset management market study.
Woolard says: “We are very much aware of the research around effective disclosure and therefore agree with your overarching point that lengthy documents can confuse consumers.”
“We keep our disclosure rules under review and will consider a broader review, alongside other priorities, where there is a clear case of consumer harm.”
Bell says the FCA acknowledgement of the appropriateness of documentation as an issue is a confirmation the current regime is inefficient.
However, he argues it is “hugely disappointing” the regulator is not acting on practical issues for consumers at the same time as it is involved in wide-ranging reviews of the asset management and platform sectors.
Bell says: “We agree there is also a responsibility for firms to communicate effectively with consumers but the FCA has created an environment over the years where companies feel like they need to provide swathes of information to avoid regulatory sanction. Therefore the FCA has a duty to look at that environment to give companies the confidence to make improvements.
“The further guidance on effective consumer communication that Woolard confirmed would be published later this year is a step in the right direction but to realise meaningful change we need to stop tinkering at the edges and engage in a deep dive review of point of sale disclosure as a whole.”