Pensions 

FCA consumer champion warns on complex products

FCA consumer champion warns on complex products

The new chairwoman of the regulator's Financial Services Consumer Panel has spoken out about a "plethora" of products in the market that consumers do not understand and advisers fail to properly explain.

Wanda Goldwag joined the panel, created to advise the Financial Conduct Authority on the interests and concerns of consumers in its policy development, in March, following the departure of Sue Lewis after five and a half years in the role.

Speaking to Financial Adviser Ms Goldwag praised the pension freedom reforms but warned with greater choice came the need for "very good" advice.

She said: "I think pension freedoms was a very good initiative, but one of the things we now need to make sure is that people who have pension freedom have very good advice about what to do with that money.

"It’s terribly tempting to consider a big holiday without thinking about how long am I going to live for, what provisions do I need to make for my old age? I think people don’t have a real sense of that."

Ms Goldwag said she was "very concerned" about pensions and the "plethora" of products available in the market that consumers do not fully understand.

She said: "I think there has been a great deal of mis-selling of products, but also a great deal that are far too complex and not well explained. Including being not well explained by advisers.

"So looking back I am quite concerned about the number of occasions it was clear the customer wasn’t put at the centre of product development.

"It was always what the company needed, what commission was being paid, it wasn’t putting the customer right where they should be absolutely at the centre of financial products."

Ms Goldwag added: "Ultimately we need to ask, what is the issue for consumers, how can we protect them and how can advisers help them make the right decisions?"

Ms Goldwag is also chairwoman of the Office of Legal Complaints, adviser to Smedvig Venture Capital and a lay member of the Queen's Council appointments panel. 

The Financial Conduct Authority is preparing to hone in on product governance this year, according to its chief executive Andrew Bailey.

Speaking at a Treasury select committee accountability hearing in January Mr Bailey said the regulatory focus around the Markets in Financial Instruments Directive had so far been centred on cost and charges.

But moving forward the regulator intends to examine how firms are implementing new rules around product governance and research, he said.

The product governance element of Mifid II is aimed at making sure advisers are offering their clients suitable solutions by requiring product manufacturers and distributors such as advisers to identify target markets.

The FCA had product governance requirements before the introduction of Mifid II in January last year, but they were narrower than the new rules in terms of the financial instruments they covered.