The FPA recognises some of the challenges within the Fairer Finance report and believes that driving up industry standards and helping to protect customers’ interests is of the upmost importance – and central to our work. It is partly for these reasons that we have recently made our Board fully independent and are investing further in our Compliance activities.
Many of the issues which are detrimental to consumers relate primarily to providers who are not registered with the FPA and we believe this supports our view that customers should only deal with registered providers. We also believe there is a strong case for this to also apply to funeral directors. Support for this approach would very quickly eliminate some of the poorest behaviour in the market.
FCA regulation is not the ‘easy’ option
When it comes to increasing regulation as recommended by the report the FPA believes that FCA regulation of the sector is not the ‘easy’ solution that it first seems. The report effectively acknowledges that it would take years but also suggests a lift and drop approach to FCA regulation would be relatively easy to implement. Given the different business models that exist we do not believe this to be the case. As a simple example in a trust based model it is not clear whether the FCA would regulate the provider, the trust or both.
FCA regulation would not lead to a better outcome for customers
FCA regulation of the funeral plans sector would not lead to a better outcome for consumers as it would:
- Increase the cost of plans as increased compliance costs are passed on to customers.
- Reduce market choice as smaller players are excluded from the market to the benefit of larger players.
- Potentially remove Funeral Directors from the sales process as the FCA regulatory regime makes it too onerous for firms to supervise them.
- Move selling to more telephone based models that fit better with the FCA compliance regime.
- Reduce the scrutiny on individual providers as these providers would be small firms in the FCA hierarchy of firms – increasing the likelihood that FCA would adopt a one size fits all approach requiring providers to meet similar standards and expectations to those applied to much higher risk sectors.
- It has also been suggested that FCA regulation would provide access to the Financial Ombudsman Service and the FSCS. It is not at all clear how this would work in relation to these plans, which are a pre-payment for a funeral and not a financial investment.
FPA’s focus is to drive up standards with the end consumer front of mind
At the FPA our focus is to provide reassurance to customers that they will be treated appropriately and that the funeral they have purchased will be delivered when needed. To do this we continue to drive up standards amongst registered providers; encourage funeral directors work only with registered providers; and encourage customers to ensure they are buying a plan from an FPA registered provider. Continuing this work – with the support of the industry – is how we believe the industry is best regulated and offers customers the best protection. If, ultimately that needs the FPA to be a statutory regulator then we would support that.