The boss of the Financial Services Compensation Scheme has emphasised the importance of consumers understanding the associated risks to products they purchase.
Speaking at City & Financial Global’s Consumer Protection in Financial Services Summit last week (September 29), FSCS chief executive Caroline Rainbird urged the industry to encourage consumers to get themselves informed and ask the right questions.
“This is particularly relevant because we're in the middle of a cost of living crisis,” she said.
“We are concerned that consumers will take more risks. There is a high proportion of misselling, bad selling and scams.”
This came as Rainbird said crypto is probably the most searched for term on the FSCS website.
“To reach as many consumers as possible to help raise awareness of FSCS protection, our marketing content, social media and Google search strategies are really important to raise awareness,” she said.
“Consumers need to understand the products they're buying and their associated risks and if they're protected.
“This enables them to make better informed decisions and so they don't approach investing in products in a somewhat blinkered or misinformed way, for example, being influenced by a Tiktok video.”
Striking a balance
During her keynote speech, Rainbird explained that the FSCS has a “difficult and challenging” role when it comes to striking the right balance between affordable costs for the industry and appropriate compensation for consumers.
“This is always difficult, particularly where consumers have lost their life savings and of course their financial stability,” she said.
“Our claims handlers not only have to investigate really complex situations relating to the claim, but are dealing with extremely vulnerable and stressed consumers.”
The FSCS needs to do more work on understanding, particularly in the current environment, what drives some of the behaviours across the consumer space, she explained.
“We also found that awareness of FSCS protection helps to inform people's choices or increase their confidence in buying protective services and also understanding the risks of unregulated products.
“Unregulated products in themselves may not be a bad thing but the important thing is for people to understand the risks - that's the same for whether it is FSCS protected or not.”
Rainbird said the FSCS wants to work with regulatory partners, stakeholders, industry, and consumer groups to help and play its part in educating and influencing.
“We're going to continue to promote our awareness campaigns through various platforms,” she said.
Rainbird added that the FSCS has worked very closely with consumer groups and wants to get to the point where customers get back on track with their redress and go into financial services industries being more informed about making the right choices.
“The only way that we can do that is the way that we can be successful is by working together with everybody,” she said.
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