In this blog, Sense Network's commercial director Steve Young argues that for the Financial Conduct Authority (FCA) to achieve its end goal of improving customer outcomes, it will inevitably need to intervene further in the financial services market.
"Sometimes in life you have to look beyond rules, norms and custom in order to see clearly why we do things the way that we do.
For the first few years of the M1, there were no speed limits, probably because most cars of the era were simply not capable of very high speeds.
It was a series of high profile incidents involving powerful cars conducting speed tests which finally alerted the government to the dangers of the growing motorway system and the 70mph limit was born.
RDR just a 'staging post' before more regulation
The origins of financial conduct regulation lie in mis-selling scandals of the 1980s and the subsequent Gower report gave rise the original Financial Services Act in 1986.
Everything that has followed has been designed to try and protect consumers against the information asymmetry which lies at the heart of the financial markets: simply put, consumers often do not understand what they are buying and unscrupulous sellers may exploit this to their detriment.
Over the past 7 years, I have watched as some observers (not disinterested ones) have resisted, prevaricated, complained and finally, with reluctance, have dragged themselves to take the action required to comply with Retail Distribution Review (RDR).
More recently those voices have called for a regulatory dividend now that RDR has been implemented.
Recently, Martin Wheatley made it clear that the Financial Conduct Authority (FCA) will not wait to change RDR. They are totally focused on ensuring that consumers are treated fairly.
As the results from the FCA's thematic reviews start to emerge, we should not be surprised if the mood music in Canary Wharf changes. RDR wasn't about qualifications, commissions or labelling: it was about achieving better consumer outcomes.
For the FCA that means delivering a clear, easy to understand service, priced fairly (and with no hidden charges) where the consumer fully understands the risks involved and crucially, is better off as a result.
Regrettably, we still see evidence of practices which run totally contrary to that ethos.
Distributor owned wraps who inflate customer charges in order to discount the price of services they deliver to advisers, centralised investment solutions which are sold like burgers in McDonalds and, worryingly, a proliferation of investment schemes which promise high yields and low risks.
So like the speed limit, the cameras and the patrol cars, we should never expect to see the end of regulation. RDR is just a staging post towards a goal of ensuring that the market works in favour of consumers. There will be more change and with the FCA, I think that more intervention in the market is inevitable."
An ambitious objective
'Something completely new'
'Illusion of control'
Reasons to be cheerful
Total investment reaches £9m