McPhail said part of the challenge for the Treasury and the FCA is to come up with a set of rules where there is sufficient protection for the consumer, without pricing out large sections of the population.
“A lighter touch on some aspects of the regulated advice regime is one potential solution. However this must not allow the unscrupulous free reign,” he said.
Weasel out
“The Financial Services Compensation Scheme provides an important backstop as part of this protection. However in its current form it penalises those firms which operate a low-risk model for their clients, by imposing disproportionately high levies.
“Meanwhile, the system allows firms which choose to sell unregulated, high-risk products (often to the most vulnerable customers) too much latitude to weasel out of their liabilities.”
The review document confirms that the British Government and the FCA would be willing to challenge European legislation on financial markets if EU laws appear to conflict with the goals of this review.
Hampering
Tobin Ashby, legal director of the insurance team at Pinsent Masons, said the exciting thing about the new review is the involvement of both the regulator and the Treasury, which “open[s] the door to potential change in the UK legislation that appeared to hamper the FCA’s recent review”.
Ashby said the reveiw is an opportunity to refine some of the rules and guidance on financial advice to cope with the new kind of services made possible by technological advances.
“This review is unlikely to bring a return to the old-fashioned world of sales-driven advice models,” said Ashby. “The regulator and the industry as a whole have moved on in an environment that is more focused on principles-based regulation and treating customers fairly.
“The consultation is careful to focus on consumer needs before asking questions on the economics of providing advice.”
