It also called on the industry to play the lead role in delivering market solutions to provide better outcomes for consumers, producers and distributors.
The FSA launched its Retail Distribution Review in June this year with the specific aim of identifying and addressing the root causes of problems that continue to emerge in the retail investment market (which includes banks, life insurers, financial advisers, building societies and fund managers). Following extensive discussions with the industry and others, the FSA has identified the following five themes to be addressed by the review:
· The sustainability of the sector
· The impact of incentives
· Professionalism and reputation
· Consumer access to financial products and services; and
· Regulatory barriers and enablers.
Clive Briault, managing director of retail markets at the FSA, said: "We want a sustainable retail distribution sector that is here today, here tomorrow and here into the future. We need to ask some hard-hitting questions about the structure of this market, such as will it always lead to adverse behaviour by some to the detriment of others? Is it capable of change? And does the regulatory framework really protect those it is designed to protect without stifling innovation?
"We know it is not the job of the FSA to dictate business models, so the industry must lead on market solutions, but we are clear that it is right for us to be one of the catalysts for change.
"The industry is on the cusp of change. The areas we have identified are already firmly on the industry's agenda and we now need to help take this forward. Our desire to act as a catalyst should come as neither as a surprise nor a threat, but as an opportunity."
To progress the Review the FSA is setting up working groups consisting of industry, consumer representatives and FSA staff for each theme. The FSA is keen to push this forward so it has given the industry some clear indicators of the matters to be considered under each theme.
The FSA will publish a Discussion Paper in the middle of next year, setting out the analysis, initial conclusions and recommendations.
