Effective quality assurance in the personal investment industry: part 2 ‐ a way forward?

Abstract

This paper is a response to a consultative document by the Personal Investment Authority (PIA), the UK financial services industry regulator. Part 1 of this paper examined if the quality management principles developed in manufacturing during past years could be useful in addressing financial services regulation. The Personal Investment Authority in applying quality assurance currently relies exclusively on the specification of processes (e.g. in its Rule Book) and checking firms’ compliance to these specifications. The paper suggests that it would be more effective and efficient instead to specify “outcome” (covering both the product itself and its appropriateness for the particular customer). A total system is defined, including issue of standard product specifications (a model is given) and a customer‐appropriateness specification, an effective and affordable quality assurance check of compliance based on sampling inspection of outcomes, and a practical system of penalties for non‐compliance.