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UKSA has delivered a 77-page analysis in response to the Financial Conduct Authority's 'Call for Input'. In their words: “We need the system as a whole, including regulation, to work better for consumers.”

  1. The FCA accepts that the market is not working

Quoting from the Foreword to the CFI:

  • “The consumer investment market is not working as well as it should. Too often consumers receive lower returns than they should because of unsuitable products with high fees.”
  • “The overwhelming majority of retail investors are best served by readily understood, well-diversified and low-cost investments which are already available from a range of providers [our emphasis], but many retail investors don’t choose these.”
  • “We need the system as a whole, including regulation, to work better for consumers.”
  1. But none of the specific questions in the Call for Input would lead to policy changes that really tackle the problem

In our view:

  • People need to be pointed to the readily understood, well-diversified and low-cost investments which are already available from a range of providers.  But it’s not in the interests of financial services providers for this to happen;
  • Regulation prevents bodies like UKSA pointing out specific best-value solutions.  In our view, by avoiding costs that reduce returns by 2% per annum or more, consumers can achieve vastly better outcomes;
  • Why is it that the regulatory regime permits consumers to remain in ignorance of the impact of expenses on their long-term savings?
  • From the FCA’s Foreword, it is clear they know which are the readily understood, well-diversified and low-cost investments which are already available from a range of providers. Despite that, because they feel unable to suggest a solution whereby this information becomes freely available public knowledge, they permit consumers to continue getting a raw deal;
  • Since the regulatory regime is currently not grasping this problem, and financial services providers have no economic incentive to do so, there is a huge gap where a respected truth-telling body needs to get involved;
  • Competition will not stand a chance of working unless consumers have ready access to the fundamental truths about investment, freely shared without the financial sector’s spin; 
  1. It is not really the fault of the FCA. 

In our view:

  • The fault lies with the objectives the FCA is set by Parliament and the Treasury;  
  • Regulators are also captured by the huge lobbying power of the financial sector over the Government and its agencies. There is no comparable people’s voice to counteract this, partly because most people with the necessary knowledge are conflicted whilst they still work in the sector. 
  • We therefore believe that consumers need to work together to help each other. UKSA has started a campaign to encourage this, which we call Savers Take Control (STC).

 

Click here for a brief description of the objectives of Savers Take Control, from the Appendix to our full response

Click here to read the article from our December 2020 magazine, which highlights the main points in our response

Click here to read the FCA’s call for input

Click here to read our full response

 

Note: UKSA and ShareSoc submitted separate responses while working together and sharing drafts with each other.

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