The Financial Confusion Authority (FCA) has just spent a year, and a massive amount of our money, discovering that some annuities are better value for money than others. Fancy that! Some brands of corn flakes are better value than others too. Some brands of corn flakes are more trustworthy than others and the same applies to annuity providers. Consumers consider it good use of their money to pay a premium for security. And who is the FCA to tell them that they shouldn’t? According to the FCA, differing annuity payments means the market is “disorderly”.
They now intend to spend a further year considering what to do about it, i.e. interfere further in the market and thereby raise the total costs for all buyers of annuities. Yes, of course financial markets need regulation, as do all markets, but the excessively detailed interventions we have witnessed since Gordon Brown gave us the Financial Standards Authority have eroded the very value for money these regulators were set up to achieve.
Regulators were created to bring about fair, competitive markets and then step away leaving choice to consumers. Of course this means that the necessary information should be provided, be it the weight of a packet of potatoes or the amount of the annual annuity. The consumer is not helped by information being excessive or over-complex. The regulator should be able to specify the key facts to be provided by annuity sellers in two days, not 12 months.
The primary mission of any organisation is to survive and, better, to grow. The FCA is no exception. The reality, as has been shown before (“I dreamed a dream of the FCA” 29 April 2013 and other ASI blogs and publications) is that the FCA is unnecessary. The little it achieves could be handled by the Financial Ombudsman Service and Office of Fair Trading.
They key lesson from these two years of FCA self-promotion is that it is struggling to justify its existence.