The Sergeant Review of Simple Financial Products appears, on first impressions, to be like sticking your finger in a dyke.
The reasoning behind it has a simple logic: we are having a savings crisis, now running in to hundreds of billions of pounds, the state is withdrawing from its compact to provide a social safety net for citizens, people are living longer, so how do we resolve this problem.
Like many other social problems, many of the solutions are staring us in the face but, as a society, we do not have the stomach to introduce those policies, which may be tough, but fair.
With the saving crisis, there is a trade off between youthful over-exuberance and delayed gratification – save now and provide a better lifestyle in your later years, or booze every night and live fast, and pay the price later.
In a civilised society, this decision in many ways has been made for us; the idea of seeing poverty-stricken people walking our streets or, worse, begging, reminds us of the worst Victorian excesses.
So, why don’t we introduce compulsory long-term saving, similar to the Singaporeans and Australians, rather than the half-baked auto-enrolment system which came on stream last year?
With auto-enrolment, in which members could opt out, implicit is that how ever much people save would be enough to raise their standard of living in retirement substantially.
It is similar to the myth sold with the moribund stakeholder schemes in which it was again implied that by saving $20 a month a scheme member would be “better” off in retirement.
In fact, in the majority of cases, moderate and low-paid workers would be saving themselves out of generous means-tested state benefits, which would have been a far greater wrong.
Nothing in the 42-page Sergeant Review answers, or even attempts to answer, these searching questions.
But there are more searching questions, apart from the false idea that these simple products will provide an adequate retirement income for the vast majority of the Great British public.
With an aggressively interventionist financial services regulator, are these “non-advised” products going to be on restricted sale through approved outlets, or would they be sold through high street banks, the very institutions that have treated their account holders as if they were fools?
Would these products be sold on the internet to anyone who has the technical ability to click on the right spot, or would they be promoted on daytime television by stars from a bygone day who have lost their popular appeal?
Or, as the Review has suggested, these would be products that investors could buy after getting so-called generic advice from the state-sponsored Money Advice Service?
And this is the rub; MAS is being lined up as a state-approved alternative to honest, hard-working, regulated financial advisers, which raises ethical issues.
There is also the suggestion of a phase two of Simple Products; in the first phase, like an over the counter medicine, the investor/saver would be able to order a packaged term assurance policy, but in Phase Two, s/he could order a whole of life policy.
How does one transition from Phase One to Phase Two?
Rebuilding trust in financial services take more than off the shelf products; it calls for making treating customers fairly to be a reality, rather than a theoretical concept.
This is a debate that still has a lot of legs in it and it looks set to run and run.
