The Financial Services Authority (FSA) has identified a number of areas in the retail spaces where it is to concentrate its efforts after publishing its Financial Risk Outlook for 2010. The publication of the Financial Risk Outlook comes ahead of its forthcoming business plan which will outline the priorities and deploy its resources.
The FSA warned
- that intermediaries who have moved into other product areas “where they have little or no experience” after facing pressure on profitability levels could pose conduct risks.
- on consumers being sold complex capital-protected products that they did not understand or were being charged too much for and
- Platforms were also highlighted by the regulator, as greater number of advisers sought help with the transition to a post-retail distribution review environment. They said that a “lack of transparency around charges and services, and platform services may not always be in the consumers’ best interests”.
- over-reliance by advisers on platforms that exclude some products. “Platforms can bring benefits to industry and consumers, but there are risks that could lead to consumer detriment. “Firms must ensure that consumers benefit from being placed on platforms and not place investments on a platform where this is not in a client’s best interests.”
- increasing numbers of consumers moving from defined benefits to defined contribution schemes seeking capital could be led into income drawdown, even though an annuity may be more appropriate. It said: “Firms providing income drawdown, or advising on it, should bear in mind that this product is unlikely to be appropriate for consumers with pension pots under £100,000.”
- structured products are also still firmly on the agenda, as popularity increases.
- it will continue to focus on ensuring that a firm’s culture and retail business strategy reflect is based on treating customers fairly. It added: “Strengthening our retail market analysis capabilities to identify and analyse earlier the nature and potential sources of consumer detriment. this will allow earlier intervention to protect consumers and maintain market confidence.”
The Financial Risk Outlook outlines the main risks and issues present in its operating environment, affecting firms, markets and consumers.
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