The FSA has floated the idea of minimum product standards set by the industry to ensure retail financial services products are fit for purpose.
The product intervention paper marked a shift in the way the FSA and later the Financial Conduct Authority will supervise firms, from focusing on point-of-sale to getting involved earlier in the product cycle such as product designs.
Responding to the paper, some consumer bodies called for the introduction of minimum product standards devised by a cross-industry committee.
The idea of industry agreed definitions has already been rolled out through initiatives such as the Association of British Insurers’ work on the total and permanent disability clause within critical-illness cover.
The FSA says: “We consider that there may be some merit to adopting industry-set minimum standards.
“However, for such a regime to be effective, it would require the enthusiastic participation of all stakeholders, including firms, consumer representatives and industry bodies, and the industry would collectively need to ensure that the regime was managed by an effective independent accreditation and supervision scheme.”
The FSA is also considering developing a single set of rules and guidance to oversee products and product design, and turning guidance on fair treatment of customers into rules.
Many respondents were opposed to the idea put forward by the FSA in January that non-advised sales should be banned for complex products and where there is a high risk of consumer detriment.
But the FSA says: “We believe this option should be available to us where we identity particularly vulnerable customers or particular circumstances in which it is the most likely route to improve customer outcomes.”
The regulator also proposed additional competence requirements for non-mainstream products such as pension transfers and long-term care.
In its feedback statement the FSA says it can see the need for extra qualifications for transactions that cannot be reversed, and will address pensions transfers specifically when it reviews pension transfer specialist exam standards later this year.