I did not think I would make it through January without coming across some sort of new industry rules or regulations for 2005. When the FSA’s Financial Risk Outlook report for 2005 landed on my desk, I drew a deep breath, hoping that the industry has finally woken up to its frailties and was this year going to try to make amends.Thankfully, the 92-page report, which is followed one week later by the FSA’s Business Plan, is not particularly new news to any of us but does demonstrate the commitment the FSA is making to improving consumer confidence and the longevity of our industry. In the early part of the report, the FSA clearly states its objectives under the Financial Services Act 2000:1: Maintaining market confidence.2: Promoting public understanding of the financial system3: Securing the appropriate degree of protection for consumers4: Fighting financial crimeI would like to focus on the first two points. Unfortunately, as some of you may agree, I believe the first objective should be reworded to say: To promote market confidence, not only maintain it. If you ask any consumer on the high street their intention to invest this year, they will probably look at you in bewilderment or, even worse, fear. Therein lies a problem. The IMA sales figures tell a similar story. From 2001-2003, net sales of investment products fell from £11,841m to £9,751m. While the property market has had a buoyant run over the past few years, people have been taking money out of “more risky investments” such as equities and investing in cash and bonds or in areas they can tangibly see and understand such as property or even art. This leads me to the second point – promoting public understanding of the financial system. Over the past two dec-ades, changes in government regulation combined with an improvement in health and demographic factors has seen a paradigm shift in the lifestyles that people seek in retirement. A reduced reliance on the state pension system and the shortfall in the savings gap has encouraged consumers to take an active role in financial decision making and understand what they are investing in. To echo an important message from the FSA’s report: “Good consumer understanding is needed for consumers to be able to make appropriate plans for the longer term and meet the increasing requirements placed upon them. Consumers also need to have confidence in choosing from the range of products available to them.” At the same time, financial institutions, including banks, life companies and investment managers, have pushed their product development teams into overtime, developing innovative financial products, with so-called capital guarantees to protect, preserve and enhance investors’ life savings. Many of these complex products req-uire an in-depth understanding of the industry and there is some question as to how many consumers, distributors and manufacturers understand these complexities. For the FSA to conceivably achieve one of its objectives of promoting public understanding of the financial system, it needs to start education at a grassroots level, with campaigns starting at schools right up to advisers and manufacturers. As a manufacturer, we have an important responsibility to make sure all our products are understood by our distributors and our investors. The media has an important role to play, too. If you cast your eyes over the daily financial pages in the national or weekly press, a significant proportion of articles touch on topics such as fees, underperformance and the split-capital debacle. I am the first to admit that our industry has some work to do on transparency and governance but I do not believe they are helping to educate consumers about the pros and cons of products but rather encouraging them to take their money out of the financial markets and invest elsewhere. Finally, I cannot be sure of all the steps the FSA is intending to take to promote financial education but I do hope that we all stop to ask ourselves four key questions:1: Do I understand the risks?2: Do I understand the product?3: Am I selling the client the best possible investment product for their risk and investment objectives?4: Are we doing the best we can to educate ourselves, our cli-ents and the end users about what they are investing in?I encourage all of us to support the FSA in achieving its objectives.