After a difficult 18 months, and with the Conservatives plotting its demise, one might argue that it’s not the best time to take on a high-profile role at the FSA. But the regulator’s new consumer champion isn’t afraid of a challenge
Julian Edwards admits he has trouble navigating the FSA. Having started his new role less than a week ago, he is still trying to get to grips with the main building’s maze of corridors. But his chief – and most daunting – task is identifying the many pitfalls facing the consumer when dealing with the similarly labyrinthine world of financial services.
Hailed by the regulator as a “champion of consumer rights”, Edwards is the FSA’s new senior consumer adviser – part of the regulator’s strategy to improve its standing on consumer issues in the wake of the financial crisis.
And consumers are not happy. More than nine million individual complaints were made to firms in the financial services industry between 2006 and 2008; 40% of which were settled in the consumers’ favour during the second half of 2008. The FSA has begun the clampdown, however. Last year, the regulator levied a record £34.8m in fines. But with the phrase “prevention is better than a cure” in mind, Edwards has been brought on board in a bid to stem this tide of retribution. His remit: help the FSA spot problems before they spiral out of control.
He explains the thinking behind his new role: “The liberalisation of the financial services markets led to a huge explosion of firms offering both services and new ranges of products, and a lot of people simply don’t understand what they are being offered. So there is a classic imbalance of information and knowledge between the providers and the consumers. Rectifying that is the principle objective.”
Edwards points out that the FSA is already making inroads into consumer education through its specialist website Moneymadeclear.fsa.gov.uk, as well as setting up a department designed to improve public knowledge of personal finance. But given that the regulator’s own research shows that public awareness about the existence of the FSA and its role in the financial system is sparse, there is clearly some work to be done. According to last year’s survey ‘Consumer Awareness of the FSA and Regulation’, the number of people surveyed who were unaware of the FSA stood at nearly half, compared with 37% in 2003.
Making a difference
Modest and softly spoken in person, Edwards has undoubtedly tackled some weighty issues during his more than 30 years of campaigning for consumer organisations, such as Which? and Consumer International. He credits one of his proudest achievements as successfully taking car manufacturers to task for failing to design cars with reference to safety measures. “Essentially, car manufacturers were making vehicles that were way behind what was known about what injures people in accidents,” he explains. “The legislation was 20 years out of date. Most car manufacturers didn’t think that it made any difference to their sales if they spent money on improving safety.”
But the publication of uncomplimentary car crash tests carried out by Which? sparked a change in attitudes. “Now, no car manufacturers can put a new car on the market before publishing its safety ratings and giving prominence to the design features it has,” Edwards says, with a justified note of pride.
Now he has turned his attention to finance, drawing parallels with his past victory and current challenges. “You might say that what we saw happening with car manufacturers is something that we would like to see in financial services, where the view of what is marketable to the consumer needs to change,” he says.
But while Edwards may have wracked up some notable achievements in the field of consumer protection, is he qualified to tackle the financial services sector? His appointment has attracted an unmistakable air of cynicism in some quarters. Some of the typical comments on a well-known financial website refer to the appointment as showing “the FSA adopting the spin methods of their bosses”, and unflatteringly describe Edwards as a “ventriloquist dummy with the FSA pulling the strings”.
So what does Edwards think of the sceptics, and how does he plan to prove them wrong? Edwards smiles ruefully but seems determined not to let the detractors ruffle him. “There are a variety of strongly held opinions out there … the effectiveness of the FSA’s work in regulating the market and improving the services in the marketplace is the test of the effectiveness of everybody here.”
While Edwards talks tough on the general challenges facing financial services, he concedes that he is yet to get to grips with the specifics – and his knowledge of the insurance sector needs to be more fully developed. He does take the industry to task for pushing unnecessary products, however, and points to breakdown insurance for domestic products as an example. He argues that consumers are often persuaded to take out insurance on purchases such as small appliances or vacuum cleaners, failing to realise that they could be cheaper to simply replace. “Someone, somewhere in the insurance industry must know that it is not very good value, even though it is profitable for them,” he says.
He adds that there is a need for insurers to promote greater levels of consumer choice. “Competition dictates that some firms are more efficient and certain prices will vary. But there may be a case for stating more firmly to people in all circumstances that they have a choice and they should take a look.”
Time for change?
Edwards is critical of the ongoing problem of the mis-selling of financial products, insisting that such transactions must become more transparent to prevent future problems. “Many financial providers actually record some if not all of their transactions. That is something I would absolutely recommend,” he says. He is also a fan of mystery shopping, something he implies the FSA should brush up on. “The FSA does some itself in some circumstances, where it thinks there might be a problem. It’s expensive, so it may be a question of targeting it more effectively, rather than doing more of it,” he says.
Clearly passionate about consumer rights and what he terms as the “imbalance of power” between consumers and providers of goods and services, Edwards’ desire to make a difference is clear. “Many people suffer financial and sometimes emotional disadvantages as a result of the way the marketplace operates, and I think it is important to do what you can to rectify the situation.”
Edwards will not to be drawn on what might happen to his position if the Conservatives – who have pledged to dismantle the FSA – win this year’s election. But he concedes that, like his battle with car manufacturers, he doesn’t expect a swift overhaul of financial services. “You don’t expect to transform the way the market operates overnight,” he says. But it could turn out that, despite his good intentions, Edwards may find that time is not on his side. IT