The Consumer Panel believes that access to financial services is in many cases an essential requirement for full participation in society. Firms should set out their terms and conditions succinctly, clearly and in a way that can be readily understood and compared by consumers.
Prices should be transparent, represent good value and be comparable across similar products. This means that firms have to be open about the costs and risks of the financial products that they sell.
Transparency and disclosure
The Panel will monitor the FCA’s Transparency Framework, especially the nine key initiatives for improving transparency and good consumer outcomes.
We have devoted significant efforts to uncovering the true costs of investing for retail investors, and proposed a number of solutions to ensure that consumers understand what they are paying to investment firms, for example those that run occupational pension schemes.
Consumers need to be provided with appropriate information on firms at the earliest opportunity in order to be in a position to make informed choices about whether or not to deal with them. We discuss this in our response to the HM Treasury’s Consultation on enforcement, where we note that 26% of consumers would find information about a firm’s conduct important when buying or switching products.
Information about warning notices is in the interests of consumers and fair trading businesses seeking to compete on a level playing field, and we have welcomed the FCA’s approach to warning notices.
Advice
The Panel considers that the Retail Distribution Review (RDR) has made significant improvements to the investment advice market. It made clear how much consumers pay for financial advice, what they pay for, and improved professional standards by introducing a minimum level of qualification for all investment advisers. We reiterated this position in our response to the Financial Advice Market Review[1], and urged industry and Government to present evidence of any 'advice gap' before considering lighter-touch regulation of the financial advice sector.
The Panel has for some time also had concerns over the market for non-advised sales. To ensure that consumers understand when a sale is ‘non-advised’, and the consequences for consumer protection, we have called for a code of conduct for firms that sell financial products on a non-advised basis.
Consumers will often perceive assisted non-advised services as being ‘advice’ and not understand that they are buying execution only, with no recourse to redress should things go wrong. We welcome the introduction of an ‘appropriateness’ test for such products under MiFID 2, but remain concerned about its implementation.
Money Advice Service (MAS)
In 2014, the Panel responded to Christine Farnish’s review of the Money Advice Service (MAS). The Panel believes that generic financial advice is particularly important given the low levels of consumer capability in the UK and the lack of trust and confidence in the financial services industry. Generic advice can also contribute to financial capability by helping people engage with their finances and make choices based on impartial information.
Against this background, the Panel strongly supports the existence of MAS and we want to see the Service fulfil its objectives as laid out in statute.
Access
Consumers should be able to access vital products and services they need in order to participate fully in society and protect themselves in the short, medium and long term.
The Panel supports initiatives to ensure access to basic bank accounts for all consumers, which are a necessity to fully participate in modern society. We highlighted this issue in our submission to the Treasury Select Committee, and we will be following the implementation of the new EU Payment Accounts Directive closely to see how this will change the situation in the UK.
In addition, access to financial advice is a key concern, particularly in view of the pension reforms that enter into force in April 2015. Many people will be able to invest their pension pots as a lump sum, and many are likely to turn to regulated advice to decide how to invest their money to ensure their financial well-being in retirement.
Redress
The Panel believes that where things have gone wrong, consumers should be able to resolve their problem without facing obstacles and in a straightforward manner.
Payment Protection Insurance (PPI) cases continue to dominate the Financial Ombudsman Service (FOS) workload, and we are pleased to see that reducing the time taken to resolve cases is a priority.
The Panel has also highlighted problems with complaint handling by banks and is concerned about the increase in complaints about current accounts.
It has spoken about forced closure of accounts where consumers are left with no information about why the account has been closed and it has written to the BBA asking them to address this issue, but have concerns that this is not being addressed as a matter of priority.
Guarantee Schemes
The Panel believes that the Financial Services Compensation Scheme (FSCS) plays a key role in ensuring consumers’ assets are protected and in maintaining confidence in the financial system.
The Panel are encouraged that the 2014 EU Deposit Guarantee Schemes Directive has mandated protection for temporary high balances[2] for the first time, and we engaged with the Prudential Regulation Authority to provide input into how this protection will be implemented in practice.
We continue to believe that compensation limits should be applied to each brand and have engaged with the FSCS, PRA and FCA on this issue.
Alternative Dispute Resolution
The new EU Alternative Dispute Resolution Directive[3] will make it compulsory for the Government to ensure access to ADR procedures for almost all consumer-business disputes.
The Panel is keen to ensure that the Financial Ombudsman Service (FOS)[4] is highlighted as an example of best practice at EU-level, and that its powers to pass binding decisions in favour of consumers are not watered down.