The Financial Conduct Authority has told networks that allow advisers to chat with clients online to check customer understanding of the product and its features on the telephone in the days after purchase.
Ben Wright, head of technical services and research at Tenet, attended the regulator’s smarter disclosure roundtable and revealed at the meeting, the main barriers to customers understanding what service they should expect were identified.
The FCA was told the Financial Ombudsman Service approach resulted in firms over-disclosing to consumers to avoid action being taken against them and European directives also result in firms being required to give extensive and non-essential information to consumers.
Product disclosure is viewed as a risk-management tool rather than a tool or an aid for consumers, the regulator was told, plus underwriters, lawyers and compliance staff at advisory firms require more disclosure.
The City watchdog was also told the cost of changing existing disclosure practices was considered to outweigh benefits by most advisory firms.
But, of most interest to firms that use online video technology to deal with clients, the FCA advocated the use of such systems at the meeting by identifying it as “good practice” when it comes to product disclosure.
The FCA gave a ‘thumbs up’ to live chat and videos explaining how products work but warned customer understanding of the product and its features and conditions should be checked orally, using the telephone, in the days after purchase.
At the meeting, Mr Wright said the FCA confirmed it will be holding a series of roundtables on the subject of disclosure.
The outputs from these could result in a paper being published, which the FCA confirmed will be published in the autumn.
Mr Wright said: “By holding these roundtable sessions, the FCA is demonstrating that they are serious about working together with the industry to improve the quality of product information to consumers.
“While there are constraints such as European directives, it was good to learn that the regulator is supportive of firms using technology to improve product information and the roundtable was able to identify numerous examples of positive practices.
“I think that the industry is wary of making substantial changes to disclosure, based on the potential risk of future claims. If widespread change is to happen, the FCA and Fos will need to give some re-assurance around future liability.”
The FCA’s comments about online chats come as one of the non-profit ‘advice’ services that has been widely touted as being likely to take up the deliver of the government’s promised retirement guidance has proposed “virtual face-to-face” sessions as the main thrust of a service it believes it could easily scale up to meet demand.
Tpas, along with the Money Advice Service, has been recommended by many industry commentators including the Association of Professional Financial Advisers to deliver the chancellor’s guidance promise of free, impartial and face to face guidance.
