2 October 2018
A silver lining to Brexit: the opportunity to rethink our clumsy disclosure regime
Brexit has proved nothing but a massive mess since the country voted for it two years ago. It's ripped a hole through our political system, which may prove irreparable, and it's clogged up our regulators with work that distracts from their wider purpose.
I'm an unashamed remainer. But as I've tried to come to terms with the result, I've been seeking some silver linings. And there is one very significant benefit in the world of personal finance which could be transformative.
One of the EU's biggest failures is the regulation that it has imposed on the UK's financial services industry. Where our markets are cross-border, it's scrutiny can be welcome. But in many of our domestic markets - such as general insurance and personal banking - it's rules have been clumsy and simply haven't fitted what is already a relatively sophisticated regulatory regime.
Burying consumers in paperwork
My particular bugbear is the mountain of disclosure regulation that has resulted in companies having to publish ever more documents which consumers aren't reading. The intention can't be argued with. Policymakers want to standardise language and documentation so that consumers can more easily compare and understand the products they are buying. But these requirements have been layered over existing rules and have left consumers with a mountain of paperwork which they don't read.
For me, the great opportunity that Brexit presents is to get rid of these documents. The Insurance Product Information Document, the new banking fees and charges document, the requirement to tell your customers, in English, that their documents are written in English.
Recently, the Payment Accounts Directive forced banks to start using standardised language for various banking terms. The result has been that some banks have made their documents less easy to understand.
Common sense has been washed down the plughole.
The FCA see the opportunity too...
So it was refreshing to hear the FCA chairman acknowledge these problems today - and perhaps give a nod towards the regulator's intention to make changes post Brexit.
Here's an extract from FCA chairman Charles Randell's speech made today:
As Chair of the FCA, I am struck by the fact that both consumer and industry representatives have many of the same complaints about regulation. For example, they have the same complaints about customer onboarding procedures, disclosures and paperwork requirements.
At the same time, behavioural scientists have found that personalised, targeted explanations of key facts to consumers are far more effective at promoting their engagement with financial decisions than disclosing everything there is to know about them in a bewildering sheaf of paperwork.
Mr Randell rightly points out that less communication can be more effective - a fact that many companies allow themselves to lose sight of, as they surrender to the mountain of regulatory requirements they have to comply with.
Even in this current regime, there are often ways around these rules. We recently worked with a bank helping them look again at the Payment Accounts Directive requirements - to ensure they didn't damage their documents while implementing these rules. It's not always easy - but there is usually a sensible path through.
But let's keep the pressure up to rethink the whole disclosure regime post-Brexit.