Last night's speech was Wheatley’s first since the FCA came into operation on Apri Fools' Day and he took the opportunity to address the challenges facing the financial services industry.
Wheatley initially focussed on the concept of ‘buyer beware’ and suggested that the belief that consumers ultimately have responsibility for making poor decisions has its limitations.
Wheatley said: “Buyer beware becomes hard to defend when unsophisticated customers are buying seriously complicated financial products, where the risk of failure is far more dangerous than a decision in the supermarket to buy three bananas instead of one.
“There are questions that many investors simply will not ask because they are humans, not automatons.”
Wheatley also outlined his vision for how behavioural economics will be used by the FCA and how he hopes firms will act in future.
Wheatley said: “I want the FCA to bring a more human face to the regulation of financial services, a more pragmatic approach to regulation. Not only to defend against sharp practice but also to encourage better decision making among consumers.
“The best financial service companies, the most consumer-focussed, go to considerable pains to make sure their customers are steered towards the best products and the most suitable. We should applaud these firms and learn from them.”
Wheatley also stated his belief that a better understanding of how customers make decisions will also improve competition.
He said: “The FCA wants to make sure customers are far more easily able to compare product prices and to assess their value.
“We want the regulatory system to use behavioural economics to ascertain whether people are being put off switching products through inertia, inattention or even the simple fear of regret from making a wrong decision.”
But Wheatley was also keen to recognise that behavioural economics is an area of fledgling expertise and would not solve every problem – nor should it try to.
Wheatley said: “We should not pretend this is a straightforward discipline. There is no mechanical routine to follow when we apply behavioural economics to regulation.
"It will require us to change the way we identify risks, diagnose problems and troubleshoot.
“It’s also worth pointing out that behavioural economics is not enough, on its own, to guarantee good regulation or strong financial products. It is a part only of the new FCA’s identity.”