Regulation of financial services should be the last resort, not the first, says the Association of Independent Financial Advisers (AIFA).
Chris Cummings, director general of AIFA, has responded to the European Commission’s green paper on financial services, which proposes a single European market.
The Association of Finance Brokers (AFB) has also responded to the paper, raising concerns over the regulatory future of the secured loans market.
The AIFA calls the commission to carry out an independent cost-benefit analysis before introducing any directives. AIFA also says consumers’ needs should come first in any moves to standardise products.
AIFA also says the commission must evaluate consumers’ desires to use cross-border financial services and create a transparent market structure.
The body does not believe the commission can create a uniform market for long-term savings, retirement and pension schemes across Europe.
Cummings says: “The EU should be mindful that the UK retail financial distribution market is unique because the majority of business in retail financial products is arranged through intermediaries. The delivery of this advice, according to Deloitte research, has the potential to improve the wealth of low to medium income earners in the UK from £38bn to £78bn even if only 10% were to optimise fully the advice given.
“We support the Commission’s views that there must be a rigorous and thorough analysis before introducing any new regulations, which takes into account both the benefits and the cost to firms and consumers, and the impact on the market.
“There are many reasons why consumers are naturally restricted from using cross border financial services such as language, taxation, social welfare and currency. The Commission must consider these issues before seeking to force standardisation that will not benefit consumers.”
On Tuesday Cummings and a pack of industry heavyweights signed a letter to the commission's head, Charlie McCreevy, recommending the commission should "improve its knowledge of consumer demand".
The letter also says "the challenge now is to consolidate progress and work together on applying the better reglatory disciplines, rather than bring forward new regulations in the retail market".
The AFB says it is worried about any potential changes to the regulatory structure of the secured loans market and expresses concern over access to credit data on a cross-border basis.
Robert Sinclair, director of the AFB, says: “The EU Commission needs to consider carefully the current UK regulatory structure before seeking to impose any universal changes to the second-charge secured loans market.
“The UK is comparatively unique in benefiting from a strong intermediary sector. We hope the Commission can learn from our success, and develop an understanding of the value of advice to consumers.
“We also bring to the Commission’s attention the recent changes in the UK Consumer Credit Act which have significantly affected our members. These changes have also resulted in very robust and all encompassing credit legislation and consumer protection.”
Yesterday the Investment Management Association (IMA) urged the commission to create a more level playing field at EU level between different savings products.
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