View more on these topics

Intelligent intervention

Last week, the IMA gave the FSA the benefit of its wisdom in response to a discussion paper on product intervention.

Arguably another example of the fallout from the credit crisis, the FSA decided it needed to beef up its consumer protection role by trying to deal with problems before the point of sale.

It is hard to argue with the principle but it must not create a situation where we have a risk-averse regulator taking action that stifles innovation and competition. On the face of it, product intervention is not a problem for the fund management industry. It is some-thing we are well used to, given that funds need to go through a pre-approval process and have to be auth-orised by the FSA.

A fund would not even get to market if it presented potential issues as it would not be authorised in the first place. Applying this level of scrutiny to other investment products can only be a good thing.

Another factor when considering the impact of product intervention is the extent to which funds are regulated by European legislative requirements, not least the Ucits IV requirement for a document containing information for investors about risks, rewards and costs.

In addition, authorised funds must provide a spread of risk and comply with rules on investment and borrowing. Managers are subject to independent oversight and strict risk-management processes.

All of this suggests there would be limited mileage in developing new rules to follow when designing and managing products. Translate some of this regulation to other products and not only will we have a fairer industry but less need for discussions about intervention.

There will be instances when the FSA needs to have recourse to a range of different options to address market failure, and product intervention is one such tool. But it is important that the regulator’s focus is not detracted from the need to properly supervise distribution, identify and deal appropriately with misselling cases and identify instances of consumer detriment.

As well as focusing on the manufacture and distribution of products, attention needs to be paid to their promotion. More could be done to deal with promotional material that does not fully disclose risks that have gone on to cause consumer detriment.

The issue remains that product inter-vention will not be effective in dealing with products that are manufactured offshore, a prime example being the ongoing Keydata debacle.

Finally, it will often be the case that those involved in the market on a daily basis are best placed to spot potential issues or cases of consumer detriment. If the FSA set up some sort of early warning system this would allow concerns to be raised informally and also give the regulator an indication of the market’s views on particular products.

Let’s see some intervention but let it be appropriate, proportionate and sensible.

Mona Patel is head of communications at the Investment Management Association


Pru annuity sales hit after Zurich abandons single-tie deal

Prudential’s external annuity sales suffered a 42 per cent decline from £26m to £15m in the first quarter after Zurich ditched its single-tied annuity outsourcing contract with the provider. The 5-year agreement meant Zurich passed its maturing pension customers on to Prudential. The Pru is understood to have paid around 3 per cent for the […]

Collins Stewart’s Martin Turner to join MAM Funds

Collins Stewart head of UK small and mid cap equities Martin Turner is leaving to join MAM Funds, Money Marketing understands. Turner will co-manage the diverse income trust alongside Gervais Williams. The fund aims to focus on quoted British small and mid caps, holding between 1-1.5 per cent of the total portfolio in each investment. […]

Avelo consults on staff cuts

Avelo has put a number of its 400 staff under consultation following the merger and rebrand of 1st Exchange, N4 and Screen Business in March. One Avelo employee, who wishes to remain anonymous, says the move was announced internally last week and will affect product analysts, software technicians and project managers across the firm’s sites […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. Julian Stevens 16th May 2011 at 8:52 pm

    The industry as a whole could well do with a large dose of intervention in the activities of the regulator to ensure that it acts in a manner that’s appropriate, proportionate and sensible. As ever, the Statutory Code of Practice For Regulators springs to mind, though AIFA’s stance appears to be that the Code is worded in such a way as to allow the regulator to excuse itself from compliance on just about any pretext without reference to any other body. So why isn’t AIFA trying to get the powers that be to strengthen the requirements for the FSA to comply with the Code? Instead, it appears simply to have given up without even trying.

    So just what has AIFA actually achieved over the past the years in return for the voluntary levies it’s gladly taken from its (apparently steadily dwindling) membership? How much has AIFA spent to date on its very existence and what, in return, has it actually achieved? I think we ought to be told, because if the Cost:Benefit Analysis doesn’t stack up, then what is the point of AIFA?

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm