On a more positive note, the regulator’s proposals for reforms in the non-workplace pensions market – including the creation of a default fund (or potentially funds) and warnings to those invested in cash – appear less prescriptive, suggesting lessons are being learned.
The risk of spurious claims
It will also be important in policing this new approach that the regulator and others – most notably the Financial Ombudsman Service – acknowledge the natural limitations when trying to ensure good outcomes for customers.
When investing for the long term, risk is inherent. Even with perfect target market definition, processes and communication – and the best will in the world – some people will always misunderstand the nature of that risk and suffer losses they may feel aggrieved about.
Claims management companies will inevitably seize on this shift in approach from the FCA to pursue spurious cases against businesses. The FCA must make clear in both its communications and actions that such claims, which suck time and resources away from vital customer-focused work, will not be tolerated.
As part of this, the regulator must work closely with the Fos to ensure the intention of this new regulatory approach is reflected in its stance to future complaints.
The FCA must also face up to the inconvenient truth that most ‘bad’ actors in financial services either flout existing rules entirely or take a slapdash approach to treating customers fairly.
So, while the FCA is right to focus on boosting standards across the market, there also needs to be a credible enforcement threat against the minority of businesses who consistently fail savers and investors.
The regulator says it plans to be more assertive in dealing with businesses who do the wrong thing – this will be crucial in delivering improved outcomes for consumers.
Guidance versus advice
Increasing the number of people who take regulated advice must remain a key focus for the regulator and across government.
But where savers do not take advice – either through choice or because they lack the funds – it is important the regulations allow for useful support to be provided. In some cases this will be from Pension Wise, the government-backed guidance service, but there also has to be a role for providers to play.
Investment platforms hold a treasure-trove of customer data, meaning they are ideally placed to help non-advised savers make better-informed decisions. However, the regulations make it very difficult to support customers in this way without giving regulated advice.
Most non-advised pension providers take a risk-averse approach to helping customers for fear of straying across the boundary into providing regulated advice.
This is potentially leaving large swathes of the population making difficult decisions about their retirement – particularly when turning their pot into an income – with very low levels of support.
