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FSA advisory panel calls for less consumer responsibility

The Financial Services Consumer Panel is calling for consumers to be given less responsibility for their financial decisions.

The panel is an independent statutory body and was established to advise the Financial Services Authority on the interests and concerns of consumers and report on the regulator’s performance in meeting its objectives.

This week it has published a briefing paper on consumer responsibility which argues that it is unreasonable to expect consumers to understand the detail of complex financial products and services.

The new Financial Services Bill, currently being discussed in parliament, contains a proposal that the Financial Conduct Authority should have regard to the principle that consumers should take responsibility for their decisions.

The FSCP argues that this principle creates a risk for consumers. It says that financial firms have an overwhelming advantage in knowledge and understanding and it is therefore essential the regulator ensures that products and services do what consumers reasonably expect.

Adam Phillips, chair of the FSCP, says: “Clearly consumers need to act sensibly when making decisions about financial services. However, all too often the products they are being sold are so complex and the risks involved so obscure that it is impossible for them to make reasoned decisions.  

“This is why the panel believes that the FCA should be able to make rules to impose fiduciary responsibilities on the industry. This would ensure that consumers could be confident that the firms would act responsibly and treat them fairly.”

He adds: “Given the complexity of financial services, knowledge is power. This power currently resides in the hands of firms rather than consumers. It is time to redress the balance, not to load further responsibility onto consumers.”

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  • Pete Collins 2nd March 2012 at 10:25 am

    Peter Drake’s and Glen McKeown’s comments pinpoint some of the reasons that we have such problems in the financial sector. It really beggars belief !!

  • Grey Haired Underwriter 2nd March 2012 at 8:58 am

    Perhaps I am in a minority of one here but I find the whole concept quite offensive. Why should consumers have the right to deny any culpability for their actions. Driving a car is a complex process from the outset but that doesn’t mean that a driver can deny their responsibility for exceeding the speed limit. I agree that some financial products have their complexities but these types of comments imply that the general public can be considered to be ‘thick’. In fact I suspect that the more intelligent consumer could see this as a way of printing money because there will undoubtedly be some form of compensation culture to accompany this concept.

    What a lot of balderdash

  • Aidan Cox 1st March 2012 at 5:45 pm

    Could the previous poster (Glen) have put it anymore succinctly. A one page summary to base the decision with the full “policy docs” for any “techies” out there. Clients sign the one sheet to say they have read and understood the contents. As Glen said – if they cant be bothered then its down to them

  • Glen McKeown 1st March 2012 at 4:28 pm

    It is difficult to know if Mr Phillips is a bit doddery or the journalist precising the report but it is difficulty to imagine any concept being so unclearly put.
    Revoking or reducing caveat emptor is a dangerous process, since it could have the effect of distorting development in the markets (though there is no current evidence to support that contention). Why should a building society take any level of risk if consumers can blithely turn around and say that they didn’t understand the product, whether they are telling the truth or not.
    On the other hand I am sympathetic to the concept that some products are complex. The simple answer to that problem is to ensure that the explanation of the product and its outcomes are clearly explained on 1 side of A4 paper. If the essentials cannot be contained on one sheet of paper then they are not licensed for sale.
    This retains caveat emptor and also ensures that consumers have the facility to make themselves aware of the product they are taking. If the consumer cannot be bothered to read one sheet of paper they do not deserve protection. If providers cannot explain their products clearly and accurately on one side of paper then they too do not deserve protection.
    I wouldn’t be surprised to learn that such an approach could be accomplished within the existing framework. What would surprise me is the FCA taking responsibility for such a procedure, because it would put a degree of responsibility on them. Therefore I would suggest that the legislation should impose such a responsibility, and thus make them responsible for their actions in the market place.
    Clear rules, not sentimental sap. Words like confidence and treating clients fairly are normally used when policy makers and influencers have had some form of brain fade.

  • Peter Drake 1st March 2012 at 3:01 pm

    Duuur! Have these folks never heard of Google?? From an explanation of mortgages and what to look for, to fixing a tap, FSCP, its all there. Why don’t you check it out? There are more pertinent issues for you to look at!

  • Mark 1st March 2012 at 2:19 pm

    So true, but when a financial product is sold that gains commission for the salesperson, that is where the main problem lies as the commission is generally the main driving force