Behavioural biases, their impact on customers, how the FCA thinks and likely interventions.

I have just read through ‘Occasional Paper No.1: Applying behavioural economics at the Financial Conduct Authority’ in relation to their understanding of behavioural biases in the communication and promotion of investment products.

It provides a clear view of the growing sophistication of the regulator’s perspective on many issues that are directly pertinent to the way both investment managers present product attributes and choices and how advisers run their investment suitability processes.

While its a long way from providing details of what the FCA will actually do in practice, it’s well worth reading. I would imagine that it will stimulate much thought and hopefully, review of current communication practices.

My initial reaction is that it will lead to much more careful discussions around prospective returns and likely volatilities of investments. Consequently this will enhance the current trend towards investment simplification and ready packaged portfolio solutions.

http://www.fca.org.uk/static/documents/occasional-papers/occasional-paper-1.pdf

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2 thoughts on “Behavioural biases, their impact on customers, how the FCA thinks and likely interventions.

  • I haven’t yet made time to read the paper but I was encouraged by the intent signalled by the FCA so early on to use an understanding of consumer thinking and behaviour.

    I had a wry smile at the observations reported in the press about excessive information leading to worse decisions by the public. In my world of SIPPs for example, we are pressed to supply a great deal of information and the quantity has headed in only one direction in recent years. If the FCA can reverse that trend, it will benefit millions.

    Reply
  • I haven’t yet made time to read the paper but I was encouraged by the intent signalled by the FCA so early on to use an understanding of consumer thinking and behaviour.

    I had a wry smile at the observations reported in the press about excessive information leading to worse decisions by the public. In my world of SIPPs for example, we are pressed to supply a great deal of information and the quantity has headed in only one direction in recent years. If the FCA can reverse that trend, it will benefit millions.

    Reply

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