UK financial watchdog reviews 'scandal-hit' consumer investments

'There have been too many scams and scandals', says FCA chief

FILE PHOTO: The logo of the new Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren/File Photo
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The UK’s Financial Conduct Authority has issued a “call for input” to the country’s consumer investment industry as it looks to overhaul the scandal-hit sector.

The watchdog’s feedback request will help “shape its work” over the next three years as it makes its review of the sector a priority for its 2020/2021 Business Plan.

“The consumer investment market is not working as well as it should. There have been too many scams and scandals and too often consumers are offered unsuitable products or advice. As a result, many consumers lack confidence in the investment market,” said Christopher Woolard, the FCA’s interim chief executive.

“This call for input is aiming to help shape the future of consumer investments, including regulation, to ensure consumers can have faith in the market.”

The UK’s investment market, which has more than 5,000 advice firms and more than 27,000 advisers, has been plagued with a series of financial scandals over the past few decades with issues ranging from the sale of endowment mortgages, and pensions to the mis-selling of payment protection insurance.

British advisory firms have also come under fire in the UAE for mis-selling financial products such as life insurance and contractual savings plans to expatriates looking to invest their savings.

In April, the UAE Insurance Authority postponed the roll-out of its new life insurance regulations until October 16, which are set to offer customers greater transparency and apply commission caps to the sale of protection products.

"This move from the UK might be a great example for other countries to follow suit. The UAE's financial services firms, although behind, has seen vast improvement over the years," says Stuart Ritchie, director of wealth advice at financial advisory AES International, which has offices in the UAE and the UK.

"Every week I encounter international professionals who've been offered unsuitable advice and products. With the FCA's request for input, I believe investors will find peace of mind that their concerns are being heard."

While the FCA has made a number of revisions over the past 10 years it says that in the current market investors are still receiving “lower returns than they should because of unsuitable products with high fees”.

Questions it plans to pose to the sector include how investors can be better protected from scams and what more it can do to help the market offer a range of products that meet straightforward investment needs.

In July, the FCA’s new Financial Services Register went live, displaying information of the regulator’s past action against firms more prominently as well as guidance on how to avoid scams.

The call for input follows more stringent measures by the regulator such as taking action against pension transfer advisers and imposing a temporary ban on the mass marketing of speculative mini-bonds. In June, the FCA announced proposals to make this ban permanent.