PIMFA has raised concerns over the FCA’s Simplifying Consumer Investment Disclosures consultation.
The regulator is seeking to make improvements to the rules around the disclosures required to sell investment products and services to retail investors.
PIMFA said it is ‘supportive’ of the FCA’s objective of simplifying disclosures, but believes some of the proposals may have the opposite effect, owing to the complexity of the rules and low levels of financial literacy across the general population.
The wealth management trade body highlighted a ‘lack of clarity’ around how some rules apply to various business models within the sector.
It noted the proposals would bring significant change for firms not currently in scope of current guidelines, and it is concerned the ‘careful consideration and full consultation’ required are not being provided.
The presentation of post-sale costs and charges is a particular area of concern for PIMFA members, as is the proposal to require firms to show the effect of costs on performance in regular reporting.
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Julia Sage-Bell, senior policy adviser at PIMFA, said: “The proposal to use a different presentation basis from pre-sale disclosures is difficult to reconcile, as consistency will help support consumer education, manage expectations, and support good decision making.
“The proposals expect consumers to understand the difference between explicit costs and those integral to the running of the fund on a pre-sale basis, but on a post-sale basis, they are expected to understand that these costs have been aggregated.
“The scope of the prohibition on the retention of interest and fees on cash holdings is also unclear, as the proposals make no reference to how it applies to firms with outsourced custody arrangements, model B propositions, vertically integrated firms, and discretionary fund managers,” she added. “The same point applies to the disclosure requirements.”
