The FCA’s much anticipated “Approach to consumers” was published this week. At present it is for consultation, the window for which extends to 5 February. The final version will become one of the touchstones for financial regulation over the next few years and it will be fascinating to see how the FCA interprets the approach across its wide remit.
As usual, the twin challenges will be (1) can it be made practical for supervisors and firms? and (2) can it balance the need for consistency with the importance of treating individual cases on their merits? More on these over the coming months as the picture becomes clearer.
For now though, it’s worth reflecting back on how longstanding these issues and dilemmas are. Here are two sets of key phrases from, respectively, this week’s approach document and the FSA’s Plan & Budget 2002/03:
1.“consumers are better able to make informed choices and achieve fair deals… demand high standards and suitable financial products… take more responsibility… understand the trade-off between risk and reward…”
2.“consumers are enabled to buy the products and services they need… high quality, good value products and services that meet consumers’ needs… inclusion… access… vulnerable… consumers are appropriately protected from harm.”
Of course there are some differences, notably in the latter sections where 2 (this week’s approach document), is notably less optimistic about consumers’ ability to do it by themselves.
This difference makes sense, as our experience of the intervening 15 years is that the financial marketplace is more complex and fraught with risks that the FSA thought (even in the era of pension and mortgage endowment mis-selling). In such an environment it is unfair to expect consumers – particularly vulnerable ones – to take the level of responsibility that once seemed reasonable, and I’ve argued before that it would be in everyone’s interest that our understanding of “buyer beware” should shift to reflect this.
But in many ways the most notable feature of the two documents is their similarity. In this wider context, it is worth firms and regulators examining what has worked in the years since 2002 and what hasn’t, and how much progress we have made.
We have published our Approach to Consumers paper which is intended to broaden the debate we started in our Mission by exploring our approach to regulating for retail consumers.