In a letter to FCA director of strategy and competition Christopher Woolard in July, AJ Bell chief executive Andy Bell argued that savers and investors are being “deluged” with paperwork when purchasing a financial product.
He called for a “root and branch” review of the disclosure regime for pension and investment products.
In particular, Bell highlighted “the complexity and sheer volume” of documents advisers and providers are required to issue at POS.
These include suitability reports, key features illustrations (KFIs), key investor information documents (Kiids) and sometimes transfer value analysis (Tvas).
This “leaves savers in danger of investing in products they don’t understand and that may not be suitable for their needs”, Bell said.
AJ Bell said they got a response from Woolard, who conceded that lengthy disclosure documents “can confuse customers”.
He confirmed plans by the regulator to publish further non-handbook guidance on effective consumer communication later this year.
Although Woolard stated that a broader review would be considered in future “where there is a clear case of consumer harm”, he also indicated that the FCA is currently only prepared to make “iterative” improvements to POS disclosures where they see consumer benefit.
AJ Bell criticised the FCA for “appearing 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”.
AJ Bell said the watchdog stated that “it is for firms, rather than the FCA, to determine how to communicate with consumers”.
Risk of consumer harm
Bell said: “When it comes to POS disclosure we think the risk of consumer harm is clear. That’s why it is really recommended for a business to invest in a reliable and strong POS system, you can click this for info.
“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, Bell said, 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,” Bell conceded.
However, in order to realise meaningful change the FCA “needs to stop tinkering at the edges and engage in a deep dive review of POS disclosure as a whole”, Bell concluded.