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FCA warns against too much disclosure about ’emotionally charged’ topics

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The Financial Conduct Authority says disclosing too much information to consumers about “emotionally charged” topics like advisers’ conflicts of interest can be “harmful” and lead to poor decision-making.

Last week, the regulator published two papers on behavioural economics, firstly looking at how consumer biases can lead to a lack of market competition and secondly on how consumers react to different redress and customer contact letters.

In its paper on consumer bias, the FCA warns disclosing too much information to consumers can have a negative impact.

It states: “Behavioural biases can render regulatory interventions aimed at addressing information asymmetries harmful.

“There is evidence that extra information may lead consumers to make poorer decisions by distracting them or making them under or over-react to emotionally charged topics like financial advisers’ conflicts of interest.”

It says a large amount of information can lead to consumers ignoring important product features and focusing on headline rates.

In its 2013 risk outlook, published last month, the FCA highlighted financial comparison websites as an area of concern for promoting headline rates alone.

Highclere Financial Service partner Alan Lakey says: “There is massive information overload for clients who do not read all the documents they are given or take it in. It is good news if the regulator understands that we have gone too far in the other direction.”


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

  1. Talking of emotionally charged topics, what about the colossal costs of the present regulatory structure?

    FCA (Martin Wheatley tells us it’s going to cost us even more), FOS (riddled with inconsistent decisions), FSCS (plus extra interim levies) and the MAS (which is nothing more than a private sector funded CAB)?

    Most IFA’s consider these to be very emotionally charged topics.

  2. Here is my conflict of interest; I take no pleasure in overloading my clients with information but…….

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