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Will the FCA bring an end to information overload?

by Daniel Grote on May 01, 2013 at 14:15

Will the FCA bring an end to information overload?

Even before the Financial Conduct Authority (FCA) had slapped its bright red branding on its Canary Wharf offices, it had been sending a loud and clear message it would not be repeating the mistakes of its predecessor.

No longer would we see the box-ticking approach adopted by the Financial Services Authority (FSA). Instead, we would have a regulator that listened and treated those under its rule as human beings rather than numbers.

That has led to the FCA taking an increasing interest in behavioural economics, the academic discipline which states that not all market decisions are rational.

So far, so ivory tower, and the thought of the regulator using up advisers’ fees to dream up some airy-fairy academic musings is unlikely to be met with a printable response from some IFAs.

But it could potentially lead to some more concrete, and welcome, action. In a paper published on the topic earlier this month, the FCA acknowledged that overloading consumers with masses of information was not always in their interests. ‘There is evidence that extra information may lead consumers to make poorer decisions by distracting them or making them under- or overreact to emotionally charged topics like financial advisers’ conflict of interest,’ it said.

This is not an argument against transparency, but if it leads to a reduction in the masses of disclosure paperwork the FSA has demanded advisers provide clients, it will be a smart move.

2 comments so far. Why not have your say?

Louisa Williams

May 01, 2013 at 15:48

Hear Hear! Which client is going to read an illustration/KFD/KIDD document at 80 pages long? Not to mention the waste of resources (paper/ink/postage costs).

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Sam Caunt

May 01, 2013 at 15:58

I have already said this elsewhere but it is relevant. We did an annual review for an elderly client, annual rebalancing of investments, back to back ISAs, transfer of her funds to an adviser charging basis etc. It was around 180 pages long and occupied 15Mbytes on the hard drive.

It consisted of suitability report, fact find and risk questionnaire (both to check and sign), KIDs, Fund Fact Sheets, Portfolio Report, conflicts of interest disclosure, application forms etc. This did not include the Client Agreement, the Scope of Work document, Data Protection Statement.

My question to the FCA is what is important, what can we leave out, what requires most emphasis and do you have contact with the hindsight regulator that means that we know now how to cover our backs in case claims lawyers or a different regulator wants to retrospectively hit us ? Of course they will not answer it.

Some of what we provide is an FCA requirement but some is a European requirement, some a legal requirement (to comply with DPA or CCA)and some a need to cover our derriere. To prove we did discuss risk, attitude to risk of loss, current financial arrangements (KYC) etc. In reality there is only so much the regulator can do.

Why should we send the disconnected KIDs to advised clients? Usually they are sent as an appendix to avoid overload but they either are important or they are not. I cannot get my head around the idea that advisers send them as a second or third email with a nudge and a wink to effectively say I am only sending you this because I have to and to prove I am complying with the law. Frankly the rules are asinine that insist it is necessary to do this.

Daniel, the FCA will never give this guidance since by doing so they would in effect be indemnifying us against future claims by consumers on whose side they are always on. They never aid or assist us or indeed give specific answers to specific questions. Regulators per se are leeches, feeding on decent businesses and destroying many of them with their splatter gun approach.

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