Current financial practices are now much better than under the former financial services regulatory regime, suggests the Treasury Select Committee, despite evidence suggesting consumers now mistrust financial institutions.
According to chapter 8 of the TSC report into confidence in the long-term savings market – entitled the role of the FSA – there is no evidence the FSA has imposed burdensome regulation on the industry, says the committee, instead any lack of confidence in today’s financial services sector is the result of poor regulation prior to the FSA.
While financial advisers expressed their unhappiness to the TSC at the amount of regulation now associated with the financial services industry – through written evidence presented to the committee and during oral sessions - the TSC has concluded the only area where regulation is perhaps over-zealous is in anti-money laundering regulations because no firm was able to suggest how regulation could be reformed elsewhere.
Evidence presented by several parties suggested money laundering rules hinder consumer contributing low amounts in stakeholder pensions, for example, because they may not have the necessary paper to show firms while the administrative costs of anti-money laundering regulations are high for providers.
Moreover, the committee in fact concluded – based on evidence presented – the current regulatory regime is much improved since the FSA was introduced “as the current low level of confidence in the financial services industry is in large part a reflection of the weak regulatory framework and inappropriate industry practices that arrived before the arrival of the FSA.
Evidence presented by some industry experts disagrees with the TSC’s final judgement on the personal finance sector, as the actuarial profession’s submission suggested part of the problem now was a “culture of mistrust of financial institutions…partly exaggerated by the activities of the FSA and the media”.
The TSC does appear to recognise – albeit it is not later mentioned once IFA evidence is presented – small IFA firms may be under pressure from the growing burden of regulation, as the TSC’s exact words on the matter state:
“Apart from in the limited area of money-laundering regulations, we received no specific complaints of excessively burdensome regulation from the major companies in the industry.”IFAonline
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