Market Views


Do you think the FSA gives value for money, or would Conservative plans to transfer its powers to the Bank of England be a reasonable course of action?

Phil Jeynes, Direct Life and Pensions
Looking at the FSA from the stance of a protection insurance specialist, it is very difficult to say whether or not we get value for money from our regulator. The cost of being regulated is of course not broken down, and protection specific legislation has in the past been fairly thin on the ground.

I’m not convinced that the future is all that clear either, with a greater degree of clarity needed around how protection distributors should present themselves to consumers.

The Conservatives’ stated aim of handing regulatory power to the Bank of England is, in my view, meant as an eye catching vote winning policy; with the general public perceiving that banks were to blame for the catastrophic events of recent months, and that the FSA was toothless in its handling of the whole sorry affair.

It is about the ‘Big Bank’ being seen to be more in control of its errant children in the eyes of the voters.

One would assume that those within the FSA responsible for the day to day oversight of the industry would simply change their strip from the greys and greens of the FSA, to the shiny gold of the Bank of England, so I doubt our corner of the financial world would feel any different.

Clive Waller, CWC Research
The FSA was Gordon Brown’s brainchild, creating a tripartite system of regulation with the Bank of England (BoE) and the Treasury. It grew like Topsy!

A wiser man than I said that the bosses of the FSA have all had ‘big’ brains, unfortunately the job demands more than one big brain.

If Hector Sants and Lord Turner are to be believed, the FSA does not emerge from the credit crunch with its reputation intact, but neither does the Treasury nor the BoE.

Our concern is the impact on protection. Initially, protection was included where an investment element existed in the product. Regulation of general insurance brought in the rest.

Parkinson’s Law stated that ‘Work expands so as to fill the time available for its completion’.

Regulation has similar creep, so that term assurance is treated in the same way as retail investment, regardless of any proper need.

I doubt anyone would wish to return to a totally unregulated market.

However, if forced to judge, we must say the FSA has failed the area of protection.

It has made everything too complicated, so that we have seen 25-page key features documents. Moreover, it has failed to implement the rules it created.

It has allowed firms to sell an inappropriate product for huge rewards for years – PPI.

In addition, it has not applied the very rules created within ICOB that insist on the recommendation of products that meet the clients’ need.

Had it done so, the protection gaps would be far smaller – and that should be its objective.

Matt Morris, LifeSearch
Conservative proposals to move retail distribution in financial services away from the FSA and to the Consumer Protection Agency (CPA) is certainly an intriguing idea, but would it actually make any difference?

The FSA costs a huge amount to run yet I doubt if it has made any material difference in promoting the industry and educating consumers about the need for savings and protection.
It has certainly, and rightly, bared its teeth to those whose selling practices are at best questionable, but it has not done enough to raise up those whose intentions are good and honest and who benefit the consumer.

Would the CPA make any difference here? I feel it is very doubtful.

Exactly what form the CPA will take and how it will operate is still not crystal clear but the fear must be that it would just be another bureaucratic machine under a different guise.

With the failure of CPIEC to reach a funding agreement and move forward we need a body that will properly promote protection and other essential areas of personal finance to the public.

It would be a major boost to the industry and to the consumers if the CPA stepped up into this gap, but we do not know the outcome of the general election yet.

As such, it would be a very welcome move if the FSA used the intervening period to do what it should have been doing years ago – telling the public why the products we sell are so essential.

Neil Armitage, Foresters Friendly Society
The FSA is making good headway in meeting the needs of the consumer market, demonstrated by recent initiatives including Treating Customers Fairly and the Moneymadeclear website.

Plenty of work remains to be done, however, as the financial services industry is evolving continually, and those who are fundamentally most affected are consumers.

The FSA supports a policy of financial services provider diversity. Therefore, to regulate and accommodate such diversity effectively, the costs of regulation must be appropriate to the type of organisation under consideration.

Support and regulation of the mutual sector, as well as banks and insurance companies, is vital to ensure consumers continue to have access to a wide range of products and services. A one-size-fits-all approach might lower cost but will not support consumers by ensuring provider diversity is maintained. The FSA also prides itself on being transparent and so should be committed to this in its service costs.

While Foresters Friendly Society is supportive of the FSA and its endeavours we strongly believe that the consumer, essentially the FSA ‘customer,’ must come first. Therefore, we understand the rationale of the National Audit Office’s request that the FSA do more to quantify its impact.

The ideal scenario for any regulator is to be fully focused on regulation in a cost-efficient manner which is not constrained by bureaucracy.

Whatever happens in the future remains to be seen. Ultimately, the focus should stay the same, with the consumer team remaining at the heart of any changed strategy or direction relating to the financial services arena. Having said all that, the Conservatives haven’t won yet!

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