FSA Consultation Paper 121 and the move to depolarisation: a critical analysis

The Financial Services Authority’s (FSA) Consultation Paper 121 suggesting depolarisation in the retail financial services sector has generated a great deal of debate. The motivation for the reforms, primarily to improve the position of the consumer, cannot be disputed. Nevertheless, in attempting such a wide-sweeping change, it is clear that the reforms could bring difficulties as well as improvements. This paper argues that, to the extent that the current polarisation regime is detrimental for the consumer, this can be addressed without dismantling the basic framework of the current advice system. It acknowledges that there is a need for greater consumer education in this area, and that more needs to be done to address the needs of lower-income consumers. Nevertheless, it is argued that the advantages anticipated as a result of the more radical reforms in the Consultation Paper are likely to be accompanied by problems that could negate the overall benefit accruing to consumers