FCA acknowledges failings of point of sale disclosure regime

26 September 2017
  • Regulator agrees lengthy disclosure documents confuse customers

  • It intends to publish further guidance on effective consumer communication later this year

  • Rejects calls for an immediate root and branch review but leaves door open for a broader review in future

The Financial Conduct Authority (FCA) has rejected calls for a fundamental review of point of sale (POS) disclosure rules despite acknowledging lengthy documentation can confuse customers.

In July, AJ Bell wrote to Christopher Woolard, director of strategy and competition at the FCA, to highlight the failings of the disclosure regime for pension and investment products.

In particular, the complexity and sheer volume of documents providers and advisers are required to issue at the point of sale – including suitability reports, key features illustrations (KFIs), key investor information documents (KIIDs) and sometimes transfer value analysis (TVAS) – leaves savers in danger of investing in products they don’t understand and that may not be suitable for their needs.

In his response, Mr Woolard agreed lengthy disclosure documents can confuse customers and said the regulator intends to publish further non-handbook guidance on effective consumer communication later this year.

Mr Woolard also indicated that the FCA is currently only prepared to make “iterative” improvements to POS disclosures where they see consumer benefit. Although he did say that a broader review would be considered in future where there is a clear case of consumer harm.

The regulator also appeared to lay responsibility for POS disclosure firmly at the door of advisers and product providers saying that ‘it is for firms, rather than the FCA, to determine how to communicate with consumers’.

Andy Bell, chief executive of AJ Bell, comments:

“When it comes to POS disclosure we think the risk of consumer harm is clear. The FCA agreed lengthy documents often confuse customers and given the length of current disclosure documents this is an admission the current regime does not work. With wide scale reviews of the asset management and platform markets under way it is hugely disappointing the FCA are not prepared to do the same for practical areas where there is a clear risk of consumer detriment.

“We agree there is also a responsibility for firms to communicate effectively with consumers but the FCA has created an environment over the years where companies feel like they need to provide swathes of information to avoid regulatory sanction. Therefore the FCA has a duty to look at that environment to give companies the confidence to make improvements.

“The further guidance on effective consumer communication that Mr Woolard confirmed would be published later this year is a step in the right direction but to realise meaningful change we need to stop tinkering at the edges and engage in a deep dive review of POS disclosure as a whole.”

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