From the Editor: Do we need more committees?

In the financial services world we are already surrounded by numerous committees. But that didn’t stop the FSA from setting up a new one–excitingly branded the Coordination Committee (CC).

Made up of representatives from the FSA, OFT and the ombudsman service, the CC had its first meeting last month.

It was established as part of a strategy to “ensure there is effective and prompt redress for consumers when things go wrong”.

The remit will be to identify emerging risks with the potential to cause “widespread detriment” and promote alignment between the participating bodies’ response.

SIPPs and ETFs have already been earmarked as ‘emerging risks’ by the CC. In the minutes of its pilot meeting, the Committee highlights potential risks to consumers posed by a lack of knowledge of the cost of SIPPs compared to alternative products.

It also questions whether advisers are adequately matching the underlying investments of SIPPs with clients’ attitude to risk. ETFs and other exchange traded products were also flagged up as having “potential risks” to consumers.

However, although a new committee to promote more joined-up thinking is to be encouraged, it does appear a lot of its work should already be covered by the FSA’s now tougher approach to regulation.

SIPP mis-selling has already been flagged up on numerous occasions by the regulator, as have concerns over consumer understanding of how ETFs work.
If they have not got their message over on these issues yet then another committee looking at the problems seems a waste of time.

A new risk register may be useful for consumers but the main issue for the CC will be how quickly and effectively it can convey warnings to consumers.

Establishing prompt redress for consumers also suggests the CC or FSA may not go far enough to prevent problems in the first place if they have enough resources in place to help consumers should certain products fail. 

The FSA’s intention to intervene much earlier with product design should enable some of the problems to be cut off at the source, while the RDR should help reduce the risks if they are advice related.

But if there are failings, the CC must still have the teeth to act quickly through its member bodies to ensure the industry is not faced with more mass complaints on the scale of the PPI and mortgage endowment debacles. Its reputation cannot weather many more storms.
 
Katrina Baugh is editor of Professional Adviser and IFAonline.co.uk