Two-thirds of financial services practitioners believe the FSA focuses on consumer protection to the...
Two-thirds of financial services practitioners believe the FSA focuses on consumer protection to the detriment of its other objectives, eroding the concept of buyer responsibility.
Respondents to a survey by the Financial Services Practitioner Panel said general confidence has been undermined by the perceived naming and shaming of firms and the apparent erosion of the caveat emptor principle.
The Practitioner Panel, set up under the Financial Services and Markets Act 2000 (FSMA), comprises senior figures from a cross-section of the financial services community, ranging from LSE chief executive Clara Furse to Andrew Ross, chief executive of Cazenove Fund Management.
All but the largest IFAs are represented by member Ruthven Gemmell, who chairs the Small Business Practitioner Panel sub-group and reports back to the main body.
Recession of the buyer beware concept, which dictates purchasers be responsible for checking the suitability of what they buy, has led to concerns that providers are being over-compliant, taking an excessively cautious approach.
In response, FSA spokesman Robert Gordon-Walker said: "The FSMA says we should consider the general principle that consumers should take responsibility for their decisions, but caveat emptor is never unrestricted in any industry," he said.
However, he said there is concern at a disparity of knowledge between financial services industry practitioners and consumers, citing with-profits as one particularly difficult concept for consumers to digest.
Gemmell also believes this disparity in knowledge must be addressed, although he believes consumers should do their part to address this. "Practitioners are required to treat the consumer properly," he said. "They want to know what the expectation is when they are putting a product forward. There is no point having risk warnings on product literature if there is not at least a notional chance of people reading them. If there is no concept of caveat emptor, there is little future for the financial services industry."
The cost of complying with regulation was also a key concern in the survey findings and the FSA and Practitioner Panel have commissioned research into of the cost of adherence to financial services regulation.
This was primarily because most respondents categorised the current cost of compliance as excessive. Only 10% believe depolarisation compliance costs are reasonable and many felt the FSA's cost-benefit analysis does not stand up to scrutiny.
The analysis, many respondents commented, underestimated the cost of complying with regulations and overestimated the anticipated benefits of being compliant.