PIMFA has urged the Government to embrace a “generational opportunity” to re-energise the UK retail investment market, with wide sweeping amends to the current disclosure regime.
Following the UK’s departure from the European Union, PIMFA said that discussion papers and calls for evidence from the Government and Financial Conduct Authority have suggested a desire for wholesale reforms to areas where PIMFA members believe the case for reform “remains unclear”.
In response, PIMFA has said the Government and regulator must “use a scalpel rather than a sledgehammer” in their approach to reshaping financial services regulation in the UK and focus on the areas where genuine improvements can be made.
The trade association for the wealth management industry said it would like to see the provision of financial information to consumers simplified, with the opportunity to foster a “true culture of saving and investing” in the UK.
It argues that the complexity of Key Information Documents and the language used within them has had a negative impact on retail investor sentiment, putting investors off buying certain investment products, particularly retail bonds.
PIMFA has called for the Government and FCA to stop using disclosure information as a regulatory tool, focus disclosure information on mass market products such as funds and exclude retail bonds and take advised businesses out of a future disclosure regime, allowing them to rely on suitability letters which are tailored to their individual client’s needs and circumstances.
In addition, PIMFA said ‘headline’ disclosures should use straightforward language, be short and focus on the essential information.
It has also called for a broad review of all retail disclosure rules, including those under the Markets in Financial Instruments Directive, Insurance Distribution Directive and Distance Marketing Directive. Lastly, it would like the FCA to create a central retail disclosure sourcebook in the FCA handbook, making it easier for firms to identify and comply with the rules relating to information provision.
Simon Harrington, head of public affairs at PIMFA, said: “We are really encouraged by the Government’s desire to reform financial services in the UK to make the regulatory regime better suited to how firms work on behalf of their clients. But there is a danger that in seeking to make things better, the Government and FCA throw the baby out with the bathwater and time already expended by firms to implement certain regulations that on the whole are working well.
“The provision of financial information to consumers through disclosure documents is the one area where we believe wholesale reform is not only required but presents policymakers with a genuine opportunity to engage more people to save and invest and empower them to take more control of their financial futures. We’d strongly urge the Government and the FCA to engage with us on this issue.”
