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Heed the warnings

I am writing this before the FSA publishes its final Icob rules. I believe the rules will require stronger safeguards so that those who buy over the phone are clear on whether or not they are getting advice. They are also likely to require all those who sell without advice to make clear that the customer is responsible for the product being suitable, not the seller.

What is more, I believe the sellers will be asked to do this in an outcome-focused way. That means getting the consumer to realise that they should be certain of what they want before they buy.

The FSA is rightly concerned that the quick and easy financial services product purchase decision has a horrible habit of turning out to be the wrong one, making consumers think twice and get the decision right is a laudable regulatory aim.

But the FSA will have to deal with two probable seller reactions if the Icob rules are not to be a mockery. The first is that non-advisers will move to web-only sales – a fastgrowing non-advised area already – in order to get away with things more easily.

The second probable reaction is that whatever way they sell, those scared of making the consumer think twice will make the warnings as meaningless as they are now. On the web, they will perhaps rely on a huge “tick to acknowledge you accept our terms” pop-up that no one ever reads. Over the phone, it will be a monotone drawl that is read out once the decision is already made in the consumer’s mind so they switch off and just want to get on with it.

Bearing in mind these fears, I was delighted to read FSA director of retail policy and themes Dan Waters quoted as saying: “For many people, the internet is the channel of choice for shopping around for financial products. However, it can expose consumers to high risk as they are able to make instant purchases without advice. This is why it is so important that firms’ websites are fair, clear and not misleading. Firms should take immediate steps to improve their websites. The FSA will be carrying out a further review in March 2008 and will take action if it finds further failings.”

That sounds like planned enforcement to me and it would be wonderful if it was a joined-up approach governing Icob sellers too. Let us hope the enforcers make this rule count.

If web-based sellers, or those providers whose products they sell want to see a way in which consumers could be treated fairly in this area, they could have a look at the dummy website at breakthrough and see an effective way of confronting consumers with the realities of their situation.

Over-the-phone operators can easily develop a verbal version. The aim in all cases is to ask short, clear questions to which the expected answer is not totally obvious. In a world crowded with warnings, that is perhaps the best way of making warnings work.

Now, I suspect that sort of outcome-focused approach is the last thing that non-advisers will want, so, as ever, it will be up to advisers to draw the attention of Waters and his team to those who flout or, more likely, subvert the rules with non-outcome-focused warnings, so that the bad practice that is most non-advised selling today is sorted out.

Tom Baigrie ( is managing director of Baigrie Davies Lifesearch


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