The Regulator's Perspective
Behavioural insights play a key role in the regulation of the financial services industry and have the potential to impact many aspects of later life financial planning.
The Behavioural Economics and Data Science Unit (now the behavioural Economics and Design Unit) published a series of ‘Occasional Papers’ on this subject. The FCA also publishes research and articles on behavioural economics as part of ‘Insight’, a research project they developed to help financial markets work effectively.
The FCA’s concerned about the impact of behavioural bias on vulnerable clients, and in July 2020, noted that vulnerable clients ‘may have more behavioural biases that negatively impact their decision making’.
In December 2014, the FCA published the ‘Does the framing of retirement income options matter? A behavioural experiment’. The study reviewed behavioural biases in the purchase of annuity products. FCA found that when the term 'annuity' was not mentioned, 66% of consumers preferred the cash-flows provided by an annuity over a savings account. However, when the word 'annuity' was included in the choices, the preference for annuities dropped to 50%, representing a decrease of 16 percentage points.