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Kim North: Drowning in a sea of consultations

Kim North

Benjamin Franklin once said, “You may delay but time will not.” How relevant, with such a busy time ahead of us. Next month’s Budget is expected to remove higher rate tax relief from pensions and the FCA is conducting reviews and consultations at a rate I have never seen before. In fact, there is so much regulatory activity it is difficult to keep up with it all. Here are a few  of the most considerable changes I expect to happen in the product and distribution world this year.

First, we await with bated breath the findings of two big consultations issued last year. One is set to change the provision of retail financial advice; the other how consumers access their money held in pension funds. Both CP15/30 and the Financial Advice Market Review are dealing with complex subjects.

My view is that commission on certain products should return. It is still paid on the likes of annuity recommendations, so why not on drawdown products? As for freedom and choice, everyone in any type of pension should be able to access their funds at age 55. Why limit this just to defined contribution schemes?

The FCA’s lesser-known asset management study is also about to start. Aimed at understanding “whether competition is working effectively to enable both institutional and retail investors to get value for money when purchasing asset management services”, initial findings are expected later this year.

Considering the UK has the second largest asset management industry in the world, I hope the rules remain attractive to global investors. No one wants another HSBC-type scare, which was put down to the regulations being too onerous.

Meanwhile, the packaged retail and insurance-based investment products European legislation will be consulted upon later this year to introduce new key features documents and disclosure requirements. Having personally written over 950 key features documents it upsets me tonnes of paper will need to be thrown away because the regulators want to change a sentence or two. I have seen little qualitative research showing consumers do not understand the current disclosure regime. Why change the rules?

What is more, the FCA is asking providers to talk to customers when their policies are maturing or being cashed in when the policy was not intermediated. While this is easy to facilitate if you have a large call centre, it is most problematic if not.

I am sure everything will work out fine as long as the doom and gloom around the prospect of a global recession is not justified. After all, it does not matter if customers understand everything about prod-ucts and every bit of advice received, commission-based or not, if their investments drop in value. It is the performance that matters most of all. So let’s ensure FCA rules are right for UK consumers by responding to these numerous consultations.

Kim North is managing director at Technology and Technical 



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. With reference to commission being “still paid on the likes of annuity recommendations, so why not on drawdown products?” As far as I’m aware commission is only paid on non-advised transactions, not on recommendations. However, this does raise a very valid point, which is that whatever changes are to be made, the rules around charging clients should be the same for both non-advised and advised channels.

  2. Kim – I agree with you that there are too many consultations. A bit rich, you might think, from someone who was responsible for a good proportion of the consultations to come out of SIB/PIA/FSA. But at the FSA I did urge that we stop mucking about with the FSA rules and instead focus on trying to ensure any EU measures were got right. I still think that is the right strategy, unless one thinks Brexit is going to happen. So, although I sent a token response to the FAMR I spent a bit more time on the EU’s discussion paper on automation in financial advice and I’m now working on the EU’s Gren Paper on retail financial services.

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