In a retail market where consumers struggle to understand their own needs and to assess value for money in their product purchases, regulatory over-reliance on point of sale, transactional interventions risks being too late in the product lifecycle to prevent detriment from crystallising. From the regulator’s perspective there have been too many mis-selling scandals in the UK. The regulator wants now to develop a regulatory approach that looks more deeply into the value chain – into product governance, design and oversight by provider firms, rather than simply waiting to see what happens after products have reached mass circulation to the retail public.

The FSA is starting to look at the whole product life cycle, looking at all parts of the product value chain, including upstream processes – product development and design – as well as downstream activities – marketing, distribution and post-sale handling. The FSA wants to ensure that firms have the right incentives at each step in the value chain to produce products that add value and address real consumer needs.

Despite the introduction of the Treating Customers Fairly initiative over recent years, the regulator believes that many product design processes do not evidence any real consideration of consumer needs. Consumer research for product development often focuses on who could be sold a product and how to market it better, rather than considering the gaps in consumer needs that could usefully be filled by a particular product. Often, product design seems to be driven by benchmarking against competitor products, so there is a sort of built-in circularity and re-enforcement of entrenched practices.

The FSA’s focus is increasingly being turned to ensuring that there is appropriate alignment of the interests of product providers and distributors with the underlying needs of investors.