Britain’s financial watchdog wants firms to concentrate more in future on good outcomes for their clients than dedicating too many of their resources to redress and remediation.
In its annual report and business plan the Financial Conduct Authority (FCA) was looking forward to the time when our finance sector is finally free from EU regulation and it can start amending its rules.
Though Britain has now left the EU it still remains subject to European regulations until the end of the year at which time full sovereignty will return and the regulator can start to control its own future.
The FCA plans to work with the government to create a new regulatory framework which will reflect what it has learned while operating under the current system.
In its report the FCA said: “The current framework is too focused on rules and process, and not enough on principles and outcomes.
“We see far too many resources devoted to redress and remediation, and not enough to empowering consumers to take good decisions and regulatory action to prevent harm and safeguarding consumers’ financial wellbeing.”
It intends to ‘meet the challenges’ of EU withdrawal, market developments and changing consumer needs, adding: “We will need to shape our future approach to regulation to meet the needs of the unprecedented times we are operating in.
“We will not compromise on our expectations of firms, particularly that they make consumers’ interests the foundation of their business models and behave accordingly.”
Meeting consumer needs
The watchdog said it intended to continue with its Retail Distribution Review and Financial Advice Market Review to make sure the sectors are ‘meeting consumer needs’.
It said allowing customers to make effective decisions was one of its three priorities.
The report warned: “At present we see significant risk of harm in the pension and retail investment markets, in part driven by the way consumers have been given additional responsibility for complex investment decisions, through the shift to defined contribution pensions and the government’s 2015 pension freedoms.
“Consumers are also exposed to significant market volatility caused by coronavirus.
We want to make sure they are supported to make effective investment choices in a fair market.”
To achieve the change it plans a five year £2.3 million campaign against consumer harm by educating consumers in how to make better informed investment decisions.
The regulator’s second priority is to make sure products are designed to meet consumer need, deliver value for money and are marketed in a fair, clear and non-misleading way.
Its third priority is to make sure firms have higher standards of governance, a stronger grip over networks of individuals in distribution chains and ensuring the regulatory system can better tackle the cost of misconduct.