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FCA rejects call for suitability and disclosure document review

Contract-document-legal-2013The 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.”



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. I’d suggest IFAs should attend the FCA’s “Live & Local” events. Shouldn’t be any confusion then. Well presented, clear and concise guidance provided as to what the FCA expects. Worth travelling for even if no event local to you.

  2. Well I applaud Mr Bell for trying ….. it was always odds on, Woolard would slam the door firmly in his face
    Suitability, disclosure etc etc, is and will never be about the client, its for regulation (inc FOS) and regulation only ever since the then FSA banged on it being stand alone documents those of you who remember the “arrow” visits ( lots of nice s166’s to dish out)

    Woolard and the FCA know all this disclosure documentation is rubbish full of hypothetical calculations, ifs and buts, and generic hog wash, as for suitability reports, the same old dross to cover one’s backside, emboldened, repeated and triplicated.

    Why use 1 bit of paper when 10 is more appropriate……. arse about face…. sums up the FCA really do you not think ?

    • Keeps them all in a job mate.

      In broad terms, Obfuscation by complication backed up by complete deniability on their part as they don’t accept liability for anything; that’s your role as the IFA.

      You see, a rule book that is so massive and indecipherable it would leave Einstein thinking his brain had evaporated, ties up ever so nicely with retrospective arc-lamp inspections at the nano level, whereby they can virtually make up anything they like as an “interpretation” of the rules and land any blame for anything they choose upon your shoulders.

      And yet, as I’ve oft repeated in these columns of wisdom, both the FCA and before it, the FSA, persist in this “we can’t tell you how to run your business” stuff, but always seem more than capable of a Spanish Inquisition after the event (and they also decide what the event is of course – no point rigging the game unless you rig it completely, is there!).

      We, the Numpties, have no effective say or recourse, other than to keep paying up while we are systematically burdened with ever more responsibility for what cannot, in many cases, ultimately be controlled by us in the first place.

      If it was as easy to invest and save as it is to get a payday loan at “just 1,281% APR”, we might improve the savings rate in the UK, if nothing else. Another example is credit cards – same easy come easy go there, too. Why? Why is THAT easy and investing savings is not? Why is it that Credit Cards aren’t called Debt Cards instead (because let’s face it, that’s exactly what they are); “Would you like to put that on your Debt Card, Sir?”, doesn’t quite have the same ring to it, does it!.

      It’s because the whole economy is predicated on the public being up to their nostrils in debt, and while ever that’s the case (which will be forever), it will remain very difficult to invest for Jo public, and the guardians of the status quo will keep raising their game.

  3. Recent legislation confirmed in the latest Live and Local Events is that we now have to express Capacity for Loss in quantitative terms (everyone aware of that by the way?)
    More words, more confusion, less clarity. The stupid aspect of this is that it according to academic studies, Capacity for Loss is more than a figure. It is about 15 different factors most of which I know many firms do not consider including health, education, existing protection, dependents etc. Only and only if you consider these can you come up with a quantitative figure. As is so often the case, the FCA is insincere following regulatory bureaucracy. It makes communication with the client almost impossibly difficult to do effectively.

  4. Exactamondo, my friend – I refer to my comments re DH’s post above in your support.

  5. The FCA have previously said that Suitability reports, ideally, would be around 6 pages long.

    Our DB reports are 20 pages – all of which is client specific and minimal repetition.

    Add in Fund factsheets and KIIDS (?30 pages), T&Cs (30 pages), KFD (20 pages), IDD again for good measure (8 pages), TVAS (c20 pages), illustration and charges summary (?12 pages) and we are (genuinely) struggling to get it in a standard A4 envelope.

    For a big financial decision, we’re looking at c130 pages.

  6. “the regulator agreed such documents can confuse customers, but won’t immediately act on the issue.”

    Perhaps we’re all looking at this the wrong way. It’s only a problem if you look at it from a client’s point of view and given the FCA doesn’t seem that interested in addressing the issue perhaps we should take their lead.

    The current system is a pain but it benefits advisers more than clients. If the FCA are content with that who are we to argue?

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