FCA seeks views to help shape its work on the consumer investment market

interactive investor comments on the regulator’s Call for Input to improve the consumer investment market.

The Financial Conduct Authority has today launched Call for Input (CFI) to help shape its work on improving the consumer investment market. 

The CFI is seeking views on the following key questions:

• What more can we do to help the market offer a range of products that meet straightforward investment needs? 
• How can we better ensure that those who have the financial resources to accept the risks of higher-risk investments can do so if they wish, but in a way that ensures they understand the risk they are taking?  
• How can we use the regulation of financial promotions to make it easier for people to understand the level of regulatory protections afforded to them when they invest?  
• What more can we do to ensure that when people lose money because of an act or omission of a regulated firm, they are appropriately compensated and that it is paid for fairly by those who cause the loss?  
• How can people be better protected from scams?
• How do we help this market to be competitive, with firms striving to offer better products and services? 

Moira O’Neill, head of personal finance, and Myron Jobson, personal finance campaigner, interactive investor, comment.

On straightforward products

Moira O’Neill says: “There are many products out there that meet straightforward needs – it’s just knowing how and where to find them in a crowded universe – this is arguably one of the biggest barriers to entry for consumers. It is why we launched the interactive investor Quick Start selections for beginner investors, which we enhanced this week with three new additions across a range of risk profiles.

“But another barrier is industry jargon. The FCA optimistically left the ball in the industry’s court early last year to sort out the issue of financial jargon. Trouble is, the industry invented jargon. While we all consciously need to stop using financial gobbledegook, there’s a strong argument for a regulatory red pen too. Share class names are a case in point – how can we expect beginner investors to navigate words like ‘accumulation’? And that’s before you look at passive funds and ETFs, which are bursting with acronyms – hardly confidence inspiring for beginners.

“Above all, a greater level, and commitment, to financial education is crucial to help people manage their lives – from school through to the workplace. Financial education was made a statutory part of the curriculum in England in 2014 but remains on the periphery – now more than ever it needs to be back on the agenda.”

On investment scams

Myron Jobson says: “Too many consumers are learning about money the wrong way – from the scammers. A sneak peak of our upcoming Great British Retirement Survey 2020, which has attracted responses from more than 12,000 UK adults, revealed that 13% of respondents admitted to having been scammed, rising to 18% in the 72 to 77 age category, and 20% among those aged over 77. Investment fraud (32%) was the most cited type, followed by current account fraud (22%). The whole industry needs to work together on this issue – and it’s another reason why we need more financial education. It’s not just vulnerable groups who are at risk either – scammers are increasingly sophisticated and there is no one solution.”

Competition

Moira O’Neill says: “On the issue of driving competition, charges are always a good place to start, and pensions are a good example. While people can compare fund charges, and investment platform costs, there is a tendency for the regulator to look at different products in isolation. When it comes to pensions, for example, where much of our wealth sits and the impact of charges is arguably even greater, comparisons are impossible between different types of pension product – for example workplace pensions and SIPPs.

“Unless meaningful comparisons are made from across the whole pension market, there is a very real danger that high-charging providers will only be measured against other high-charging providers and market pressures will not lead to reduced charges, which, in turn, will have a detrimental impact on pension savings and retirement outcomes.”