To ensure that retail financial products are fit for purpose, the FSA has floated the idea of minimum product standards by the industry.
The regulator has published today the product intervention discussion Feedback Statement paper it had put out in January.
The introduction of the product intervention paper marked a shift in the way the FSA and later the Financial Conduct Authority will engage firms, right from getting involved in the early product development cycle such as product design to focusing on point-of-sale.
A minimum products standard devised by a cross-industry committee should be implemented, demanded some consumer bodies after the report was published.
Certained industry approved definitions have already been launched through initiatives such as the Association of British Insurers recommendations on total and permanent disability clause within Critical Illness cover.
“We consider that there may be some merit to adopting industry-set minimum standards. However, for such a regime to be effective, it would require the enthusiastic participation of all stakeholders, including firms, consumer representatives and industry bodies, and the industry would collectively need to ensure that the regime was managed by an effective independent accreditation and supervision scheme”, said the FSA.
The FSA is also considering to issue a single set of rules and guidelines on products and product designs, and turning guidance on fair customer treatment into rules.
It was found that many consumers were opposed to the idea of a ban on non-advised sales on complex products and where consumer interest may be seriously harmed.
However, “We believe this option should be available to us where we identity particularly vulnerable customers or particular circumstances in which it is the most likely route to improve customer outcomes”, the FSA said indicating its discretion on the matter.
Additional competence requirements were also proposed by the regulator on non-mainstream products such as long-term care and pension transfers.