At Gleneagles Savings and Pensions Industry Leaders’ Summit on Saturday, FSA managing director of retail markets Jon Pain floated the idea of product regulation as a way of improving consumer protection.
He said: “We will approach product regulation with an open mind. We would see it as encompassing a whole spectrum of possible measures. It can be about preapproving and banning products or setting parameters or constraints around certain design features.”
He added that he recognised product regulation “may be too blunt a tool” to achieve all the regu- lator’s goals and posed considerable challenges.
Advisers and providers consider product regulation would risk creating extra costs and stifling innovation.
Tenet group distribution and development director Keith Richards says: “We could end up with greater regulation and manufacturing costs on the industry, when what we need to do is ensure consumers take responsibility for their decisions.
“Most complaints relate to product performance, not complexity. Anyone who thinks that product regulation will help consumers to better understand complex products is naive.”
PFS past president Rob Reid says: “Instead of product regulation, the FSA should ensure all products are transparent so advisers and clients can clearly identify whether they suit particular needs.”
Fidelity International head of UK retail sales Peter Hicks says: “Who is liable if you let a product through that turns out not to be a good one? The stifling of innovation would possibly go too far. I am not convinced it is part of the regulator’s job and responsibility to preapprove products. I think part of regulation is policing and enforcement and they have to rely on the providers to produce good products that produce good outcomes and do what they say on the tin.”
Zurich UK Life intermediary sales director Richard Howells says anything that reduces IFA liabilities is a positive move but product regulation is at odds with the RDR’s focus on holistic advice and the emergence of platforms and wraps.
However, Beachcroft Regulatory Consulting managing director Richard Hobbs says a radical product regulation regime, where a product is deemed to be “axiomatically good in the hands of consumers”, would significantly reduce complaints.
He says: “There would still be a number of administration complaints but suitability complaints would disappear.”