AJ Bell has called upon the FCA’s Consumer Duty to scale up support for people saving for the future.
In response to the FCA’s latest Consumer Duty consultation paper, AJ Bell said the new proposals must recognise that the market is not “homogeneous” and different segments of the market have different needs.
Tom Selby, head of retirement policy at AJ Bell, said: “Perhaps the biggest opportunity the Consumer Duty and the shift to outcomes-based regulation provides is for the FCA and the industry to scale up support for people saving and investing for the future.
“In the retirement market in particular, people often face complicated choices when deciding how much to save, where to save it, how to invest and ultimately how to turn their pot into an income that lasts for 30 years or more.”
AJ Bell said that while Pension Wise provides a layer of support and information for those without an adviser, providers like investment platforms who have an existing relationship with their customers are often in the best position to offer ongoing guidance to help savers make good decisions. However, firms’ ability to offer help is constrained by a lack of clarity around the boundary between guidance and advice.
Selby explained: “Firms often have a very limited appetite for intentionally or unintentionally breaching perimeter guidance which stifles innovation in the provision of support to customers. This issue needs to be debated and addressed during the consultation phase if the Consumer Duty is to work as intended.”
AJ Bell says firms must also be given the flexibility to implement the Consumer Duty in a way that best suits their customers. The retirement specialist points to examples of new regulations that have been based on prescriptive rules and applied to an entire market without recognising the differences in customer needs.
Selby said: “For example, the FCA’s non-workplace pension consultation is proposing that pension firms have to offer a single default fund to customers, potentially including an element of de-risking. AJ Bell believes that it’s customers would be better served by a small range of funds with different risk levels.
“The non workplace pension consultation follows closely on from the requirement for providers to offer Investment Pathways to pension drawdown customers. These rules did not recognise that there are fundamental differences between platform pensions/ SIPPs and insured personal pensions and hence Investment Pathways have only been effective in part of the market.
“In both cases, the overly prescriptive nature of the rules works against achieving the good customer outcomes the initiatives are trying to deliver.”
AJ Bell has also urged the FCA to get rid of the existing rules to ensure firms have greater clarity around their new responsibilities, noting that the decision to retain the TCF principle causes a confusing layer of regulation.
Finally, AJ Bell warned of “spurious claims” and said the regulator and other bodies should acknowledge the natural limitations when trying to ensure “good outcomes” for customers.
Selby said: “While we acknowledge claims management companies can play a legitimate role in helping people who have suffered due to the failures of financial services firms, we have also seen a growing number of spurious claims in recent years. We are concerned the volume of these claims will rise still further under the Consumer Duty.
“The regulator must work closely with the Financial Ombudsman Service to ensure the intention of this new regulatory approach is reflected in its approach to future complaints. On this front, we are encouraged by the recent announcement of the strengthening of the Wider Implications Framework and in particular the increased transparency this promises to bring.”
