The FCA asked for input to its policy setting for the market in consumer investments. We welcome the initiative but it is pointless unless the regulator is serious about entertaining radical changes, even if it involves new (or a new interpretation of) primary legislation.
There is no shortage of basic investment products at low cost: competition has worked. The problem remains access to affordable advice. This is partly a problem of government’s making. Complexity in benefits, taxation and savings (and in the interactions between them) creates a need for advice where simplicity might enable people to go it alone. To the extent advice is needed, the FCA’s interventions to improve the quality of advice, which was never an issue except when the product of unethical conduct, have made the problem of access even worse, driving up the cost of advice and putting barriers in the way of technology-led innovation.
Our perspective is as an adopter of technology. Examples are the web tools that we have developed to interact with our probabilistic modelling of investment decisions. Tools such as these could easily support ‘informed self-selection’, entirely specific to individual situations and leading to designated products or services but without the requirement for a ‘personal recommendation’ which is a feature of the UK’s primary legislation (and, hitherto, EU law). We argue that the recommendation requirement has weakened consumer agency and left people over-reliant on other people to make choices for them. But greater personal responsibility can also mean being less trusting of the industry and its self-serving myths. There is a role for the public bodies in educating people to be more sceptical and street smart, both of which are more useful than technical knowledge of investment.
Part of the high cost of consumer investment advice is a consequence of the FCA’s failure to act quickly on market intelligence about bad practice, dodgy products and outright scams. Good firms bear the cost of failed consumer protection. Frustration in the industry with the FCA’s record in this area has never been so high and we are glad to add our voice. We hope the call for input will be met by a wall of sound.
Read our five-page submission here.