Advisers could have easily predicted the results of an FCA behavioural study which found consumers of financial services are badly served by an overload of information.
The study suggests too much information can lead to consumers making poor decisions, ignoring important product features and focusing solely on headline rates.
Disclosure requirements which fail to take account of how consumers process information are likely to be ineffective or counter productive, it warns.
The findings are hardly revelatory to most people but the rather simple concept that too much information can do more harm than good has been lost on previous regulators at a UK and European level.
Advisers report they are being forced to bombard clients with a small rain forest’s worth of disclosure material just to inform them about a range of investments in their portfolio.
The European-led Key Investor Information Documents, introduced as an attempt to add transparency, appear to be doing the opposite due to the deluge of information that needs to be supplied.
Bombarding consumers with pages of material they will not engage with is clearly in the interests of no-one except for printing companies and paper suppliers.
Let’s hope this behavioural study is the trigger for a debate about the true value of disclosure material to consumers.
Simplification will not be easy as documents will have to abide by European rules. But UK regulators should be prepared to take the battle to Brussels if they believe this to be in the interests of consumers.
The death of bank advice?
There was a 44 per cent drop in bank adviser numbers post-RDR, from 8,658 to 4,809. More recently, Santander quit investment advice, with 740 jobs to go, while Axa is following suit with 430 jobs at risk. Axa says regulatory requirements make it too tough to make a profit whilst keeping investor costs affordable.
Other big institutions are considering their options and it is reasonable to speculate that we could see an end to bank advice altogether.
Whatever your views about a sector which has been guilty of widespread misselling, this would be a troubling development at a time when policymakers should be focused on getting more people saving and protecting themselves and their families. It is also likely to reopen the debate on simplified/basic advice.