The Financial Conduct Authority (FCA) has published its annual Sector Views study. This is an assessment of the risks and potential harm to customers that exists in seven different sectors.

The FCA believes the main risks in the retail banking and payments sector include:

  • Rising levels of financial crime
  • Service issues relating to information technology failures
  • Customers receiving poor value from overdrafts, savings accounts and other services
  • The move towards a cashless society, branch closures and the increasing use of technology could lead to some consumers having difficulties with access to financial services

The risks in the retail lending sector include:

  • Increasing numbers of people who are overly indebted
  • Barriers that make switching mortgages difficult
  • High levels of interest and charges on some types of borrowing
  • Recent failures of firms in the peer-to-peer lending market and the high cost short-term credit market
  • Increases in the number of mortgage and credit products available to consumers in later stages of their lifetime
  • More customers are choosing five-year fixed rates, and this could lead to further competitive pressures

Risks in the general insurance and protection sector include:

  • Loyal customers being disadvantaged by firms’ pricing practices
  • Misuse of customer data
  • Pressure on insurers’ profit margins caused by low interest rate
  • Increasing numbers of people living with long-term illness
  • Growing numbers of people who use price comparison sites

The risks in the pensions sector include:

  • Consumers are likely to have reduced living standards in the future due to the closure of many final salary schemes
  • Consumers are faced with a number of potentially difficult decisions about how to access their pension pot, and making the wrong decision could lead to significant losses
  • Firms advising customers to transfer out of occupational schemes, even though customers might give up valuable guarantees and take on significant risk
  • Consumers losing their retirement savings after being duped by a scammer
  • A lack of confidence in the sector, which leads to consumers either opting out of pensions altogether, or withdrawing their pension fund as cash in a single transaction
  • The increase in student debt, meaning that younger people often concentrate on repaying these loans and don’t save for retirement as a result
  • Rising numbers of complaints about Self Invested Personal Pensions, with claims management companies increasingly active in this area

The risks in the retail investments sector include:

  • Some products are exposing customers to high-risk investment vehicles that are inappropriate for their capacity for loss
  • More customers are paying for an ongoing advice service
  • Low levels of competition and switching in the investment platform arena
  • Rising numbers of complaints about ISAs, especially non-cash ISAs

The risks in the investment management sector include:

  • Consumers are struggling to compare fees and products due to poor governance practices at asset managers
  • The increasing cyber-crime threat

The risks in the wholesale financial markets sector include:

  • The increasing cyber-crime threat
  • The increasing threat of financial crime
  • The slow progress that is being made transferring from LIBOR to other interest rates
  • Deterring, detecting and pursuing market abuse are important issues in enhancing market integrity and protecting consumers

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article