Consumer champion is optimistic about reforms

Ms Blair, known as an Edinburgh business consultant and journalist, has been speaking out more regularly on banking, pensions, mortgages and regulation as vice-chairwoman of the Financial Services Consumer Panel, and has recently been appointed vice-chairwoman of the insurance stakeholder group at EIOPA, the European Insurance and Occupational Pensions Authority.

The consumer panel, set up to monitor the FSA, most recently steered the regulator away from its more extreme clampdown on mortgages. It is currently investigating comparison sites' fixation on cost, and the lack of advice around annuities.

The panel, which Ms Blair joined in 2006 becoming vice-chairwoman in 2009, has been influential in helping the FSA stand up to industry lobbying and defend the consumer.

But she hopes for better things from the FCA, which will divide the FSA's powers with the new Prudential Regulation Authority.

"In the past the FSA had some of the tools but not all the appropriate ones, hopefully that is improving, but they will require a different culture and really good senior people to deliver."

The FSA has only recently begun to identify individual companies' records on complaints handling, and has always been prevented legally from naming any company guilty of misconduct until a 'final notice' is published .

Ms Blair said: "We are very keen they 'name and shame', very keen that they give out information sooner about firms that are extremely questionable.

"It could be four years before consumers are made aware of a problem that has been detected, and in the meantime they have gone on buying products from these companies."

The latest financial services bill still allows companies the right of consultation before any publication – a right sure to be exploited to the full by lawyers.

However, Ms Blair is hopeful. "The early statements suggest the FCA is going to be much bolder, not just looking at problems once they have occurred, but at product design.

"Already I think the FSA is taking a much more intrusive approach, looking at product intervention, which has to be good for consumers."

Ms Blair said effective action on PPI mis-selling had taken "a hugely long time", obstructed by the threat of judicial review and other challenges.

One of the lessons from the PPI saga, she said, is that banks "have not been exemplars of good practice in delivering products that are necessarily in the customer's interest".

Ms Blair saw some inside workings in her previous career. "I worked in Royal Bank of Scotland for 20 years as a consultant. My last interaction was post the NatWest merger." So what went wrong?

"They forgot about good governance and due diligence."

However, Ms Blair admits that the new regime covering financial advice – intended to clean up the industry by outlawing commissions, raising qualifications, and disclosing whether advice is fully independent or restricted by product – will create an "advice gap".

She said: "There is a squeezed middle, who may have been getting advice and not realising they were paying for it, and who will have to decide whether it is worth paying for."

However, there are risks around DIY advice. "We are concerned that consumers may not necessarily make the best choices. The worry around execution-only is that consumers go off and buy products and services that are not suitable."

The alternative to full advice might be a decision-tree system, where less qualified advisers, in banks or elsewhere, offer guidance but not advice.

"We have been working assiduously to try to develop simplified advice models ... which could be operated by somebody not qualified up to level 4." That new standard, equivalent to first-year degree level, will be mandatory from 2013. she said.

She added: "We don't think that is difficult to achieve – if you go to a lawyer or a doctor you would expect a far higher level.

"We are fully behind increased professionalism in the industry, particularly given consumers' lack of trust and confidence."

The consumer panel successfully urged the FSA to stick to its timetable for implementing the new regime, in response to an industry lobby for delay, and Ms Blair said that should pay an early dividend for consumers.

She said: "We expect providers to reduce their prices because they are not paying commissions, we would expect prices to come down and we will be looking to see whether that is the case.

"It should enable consumers to shop around and make more of a judgement as to whether the price is worth paying."

However, Ms Blair says that while consumer education is important, it is not an alternative to regulation.

She said: "It is not a panacea. There is lots of research to show that people don't assimilate financial information. It is difficult to get consumers up to speed on technical financial issues."

The problem, she said, is that unlike most shopping decisions, when it comes to financial products there is an asymetric "balance of power" between seller and buyer. She said: "The consumer already has to give honest information and disclose what their circumstances are. Why not sort out an industry which has not been renowned for treating customers fairly?

"Business models are questionable. You only have to look at the number of complaints the financial ombudsman is dealing with. You would think that senior managers would see it is in their own and their customers' interests to sort it out and do something about it."

A key area for the FSA even now to get its teeth into, she says is "incentive and reward structures in financial services".

As one of five consumer representatives at EIOPA, Ms Blair is also grappling with the Solvency II directive for UK annuities and pension funds. She said: "Annuities are already poor value for consumers... (if unchallenged) it could be the death knell for UK pensions."