Disclosure not enough to guarantee consumer protection warns Panel

4 December 2012

Speaking today at EIOPA’s second Consumer Strategy day in Frankfurt, Kay Blair, Vice Chair of the FSA Consumer Panel1, has warned against over-reliance on information disclosure to protect consumers. The Panel believes the new key information document (KID) has potential to change the way financial services products are communicated. However, the KID should only be regarded as one part of the framework necessary to protect consumers. Complex products and aggressive and misleading industry sales tactics mean that more must be done.

Kay Blair, Consumer Panel Vice Chair commented:

“The problem with financial services is that there is a fundamentally unequal relationship. Products are sold by highly knowledgeable providers to consumers who often lack an understanding of the full nature of the product they are buying. Although the concept of a document which allows comparison between products with similar outcomes is welcome, it is difficult to see how a single document can bridge the information gap.

The interests of advisers, providers, and their customers must be aligned with appropriate remuneration structures. The Panel has strongly welcomed the MiFID principle that providers must act, honestly, fairly and professionally in accordance with the best interests of their customers.

Additionally, consumers need access to straightforward outcome products that are easy to understand and have expected outcomes. Unfortunately, financial services providers are adept at developing complex products with unclear or confusing outcomes.

Within a context of appropriate remuneration and straightforward products, the KID has the potential to strengthen consumer protection, particularly if it is part of a much wider, more meaningful communications strategy. The KID should allow potential customers to compare both products with similar outcomes and those from different providers. However, the format of the document must be rigorously tested and the assumptions on which it is based must be clear and understandable if it is to achieve its objectives. It must also take account of the fact that we live in a digital age where people are used to receiving information in a different format.


Notes to editors

  1. Biographical details of Kay Blair and photographs in a range of resolutions can be found: http://www.fs-cp.org.uk/about_us/kay_blair.shtml
  2. The Consumer Panel is a statutory body under the Financial Services and Markets Act 2000 and was initially established by the Financial Services Authority in December 1998. The Panel advises the FSA on the interests and concerns of consumers and reports on the FSA's performance in meeting its objectives.
  3. The Panel’s membership is drawn from a broad range of backgrounds with expertise including market research, law, financial services industry, financial inclusion, European Regulation, financial regulation, consumer advice, campaigning, communications, compliance and later-life issues.
  4. The emphasis of the Panel's work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA's remit. More information about the Panel's work is available on our website.
  5. Panel members are appointed to serve a maximum of two terms of three years.