Treasury financial secretary Mark Hoban has rejected Money Marketing’s call for the new regulator to be given an objective of looking to boost saving rates and protection levels.
Speaking at the Conservative conference this week, Hoban said such a move would be wrong as it would set the Consumer Protection and Markets Authority up to fail. I believe it could set the regulator up to succeed where in the past it has failed.
The call for the Consumer Protection and Markets Authority to have an objective to “have regard” for increasing saving and protection levels, alongside a number of other goals is not about creating rigid targets or hurdles for the new regulator.
The CPMA will have a primary objective of ensuring confidence in financial services and markets. Underneath this will sit a number of secondary statutory objectives that must be taken into account in pursuit of this objective. These “have regards” will include ensuring policies consider the impact on financial stability and the objectives of other regulators, continuing current regulatory principles and addressing public interest matters.
Giving the CPMA a savings and protection objective is not about dishing out gold stars or wooden spoons depending on specific targets being met, or setting out a rigid trajectory for the new regulator. The general desire to increase saving an protection levels in the UK must be seen in the context of other economic and public interest issues, for example many people’s need to reduce personal debt. Any such objective would have to be evaluated alongside a host of other goals.
But what the objective would hopefully create is a shift in regulatory focus to ensure policymaking encourages rather than restricts access to decent saving and protection products.
FSA policies have been skewed far too much towards a narrow view of consumer protection, which has been focused on cracking down on misselling at all costs without enough consideration of the dangers to consumers of not saving enough or protecting themselves and their families.
Of course, the regulator must be focused on guarding against unscrupulous individuals and firms, but its lack of a mandate to address the savings and protection gap has led to a regulatory imbalance.
This has manifest itself in some of the question marks that still hang over the retail distribution review. There is a real concern that if adviser numbers drop and clients are shed as firms move upmarket, less people will get access to good advice.
The FSA has shown a worrying lack of concern about the advice hole that the RDR in its current form could create. Its plans for “simplified advice” are still woolly and underdeveloped and through the many consultation papers and discussion papers that have accompanied the review there has been a lack of focus on the dangers of growing the advice gap.
Giving the CPMA a clear mandate to encourage levels of saving and protection is not a magical solution in itself but it will create a more constructive approach to regulation.
Changing demographics mean people will have to take far more personal responsibility for looking after themselves and their families. Auto-enrolment will help but people need to be convinced of the benefits of protecting themselves and saving for the future.
For some basic information and guidance may be enough but many others will need specific advice and a strong and vibrant advice profession big enough to service these needs.
The industry can do more to engage in the debate and demonstrate the value of advice. Solutions to the advice gap need not be a Trojan horse to allow banks and insurers to “fill their boots” at the expense of the consumer. As consumers become more empowered by the internet, advisers should not see this as a threat but an opportunity to look again at the range of services that can be offered to the consumer.
But the regulator needs to be on the same side as the industry in the fight to get more people to take greater responsibility for their financial affairs.