7.1 Ethics and regulations
The FSA factsheet you are about to read highlights the importance of the seller of financial services ‘knowing’ his or her customer.
Activity 13 Know your customer
Read the Financial Conduct Authority (FCA) document entitled Our Strategy [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] , dated 8th December 2014.
Read the factsheet provided by the FSA (now the FCA) called Knowing your customer and assessing their needs.
What are the inherent conflicts in financial markets and how have these been dealt with by the role of the FCA?
Answer
Unregulated, competitive ‘free markets’ are desirable for efficiency and low costs but may lead to losses by retail investors. Also, financial market failure can damage the entire economic system.
The three operational objectives of the FCA, shown on page 5 of the FCA document, are the consumer protection objective, the competition objective, and the integrity objective. The conflicts have not been dealt with, merely acknowledged.
a.
The retirement planning questionnaire
b.
A household income questionnaire
c.
The inheritance tax questionnaire
d.
The portfolio management questionnaire
The correct answers are a, c and d.
To me, the surprising question was the one concerning political and ethical views. The customer can then be oriented towards ethical funds, which avoid investing in such sectors as weapons, tobacco or alcohol. You may have found other questions surprising.
Which question asked by the FCA did you find most surprising?
Answer
You may have been surprised by the question concerning political and ethical views. The customer can then be oriented towards ethical funds, which avoid investing in such sectors as weapons, tobacco or alcohol. You may have found other questions surprising.