Finansinspektionen (FI) presents in this report the risks consumers are facing on the financial market and that FI is prioritising in its supervision. One recurring prioritised risk is that consumers will be granted loans that are larger than what their personal finances can handle. Another risk that has been prioritised for a long time is the risk that consumers will be advised to invest in products that are not suitable for them.
Being a consumer on the financial market is different than being a consumer on most other markets. Even if most Swedes are consumers on the financial market, interest in financial products and services in general is low. The proficiency level for simple financial concepts, such as numeracy skills, is also low among many people. Innovation and the search for returns also introduce a level of complexity to the financial market that is difficult for most consumers to comprehend. Taken as a whole, this means that consumers are more vulnerable in several aspects on the financial market than on many other markets.
FI presents in this report the highest prioritised risks posed to consumers on the financial market. The report also aims to describe FI's supervision activities. Several important regulatory packages will enter into force in 2018, making it important for FI to be clear about the expectations the firms are supposed to meet.
The first risk that FI would like to highlight is the risk that consumers will be advised to invest in products that are not suitable for them. The complex environment and uneven playing field that form the financial market create conditions for financial advisory services, to fulfil an important function in helping consumer make well-founded decisions. A fundamental assumption, however, is the advisor prioritises the interests of the consumer. This is often not the case. FI has raised a warning flag for many years about the dangers of commission-based financial advice, which leads consumers to buy unsuitable products in terms of both price and/or risk. This problem could ultimately harm the reputation of the financial market as a whole and will therefore be a priority area in FI's supervision in 2018. The supervision will be anchored in the fact that the rules recently entered into force. FI will place particular focus on how firms that offer advisory services adapt to the new product governance rules and stricter commission rules. FI will also prioritise supervision of firms that present themselves as providing independent advice to ensure that consumers actually receive independent advice.
The second risk that FI would like to highlight is the risk that consumers will be granted larger loans than what their personal finances can handle. Offering the possibility to spread out consumption over time is one of the financial market's most important functions. However, if consumers are granted expensive loans that they cannot repay, there is a greater risk that they will become over-indebted – a situation that affects not only the person in debt but also their families. In 2018, FI will enhance its work related to mapping the risks associated with consumption loans. This will be done by reviewing a sample of data related to unsecured loans, revolving loans and object-financed loans from 20 bank and credit market companies. The results of this review will be presented in June 2018. FI will also conduct in-depth supervision investigations of individual consumer credit institutions and verify that the new rules regarding high-cost loans have the intended effect on the market.
A third risk that FI highlights is that many financial products have a complex fee structure. Firms face a financial interest to present their products as competitive through a low fee structure. However, many financial products are constructed in such a complex manner that it is difficult to calculate the total cost. As a result, consumers may buy financial products that are too expensive, which has a major negative impact on returns. In 2018, FI will review the information that the firms must submit according to the new, stricter regulations on cost disclosures and the fees that are charged when transferring insurance policies. The supervision will be anchored in the rules that recently entered into force. Furthermore, during the year FI will map the fees and return of a large number of financial products in order to gain a clearer overview.
Finally, FI would like to highlight the increased sales of particularly risky products to consumers. Consumers exposed to i.e CFD:s, binary options or deposits not covered by the state deposit guarantee run a high risk of losing all their invested or deposited money, and in some cases more. There is also a risk that consumers will be exposed to investment fraud. Therefore, FI, together with the European Securities and Markets Authority (Esma), has decided to prohibit the marketing, distribution or sale of binary options to consumers. Furthermore, a restriction on the marketing, distribution or sale of CFD:s to consumers will be imposed. FI will continue in 2018 to follow the development of particularly risky products.
In addition to describing the primary risks that FI has identified, the report also presents the themed investigations that FI conducted. These investigations form an important basis on which it is possible to analyse consumer protection as a whole. The report also describes the regulatory development needs that FI identifies as necessary to strengthen consumer protection.