Providers and others should be able to give generic ‘guidance’ to consumers which includes a tacit recommendation to invest in a particular product from a limited list of simple options, is one key finding in a report published as part of a major industry policy initiative.
The Savings and Investments Policy project, a coalition of over fifty firms and consumer groups, has proposed development of an industry-wide and regulator-approved ‘kitemark’ for generic guidance as one of six recommendations to help rebuild consumer trust in long-term savings.
Carlton Hood, Old Mutual Wealth’s customer director, explained that there should be a framework developed and approved by the Financial Conduct Authority which enables providers to point people towards the right products, without straying into full advice.
“The kitemark would be for everyone to use and would include sensible proposals that the 90 per cent of ‘people like you’ should consider in certain situations. There would be agreed precepts that are common sense, but providers can’t currently say [that] in case it is construed as individual advice.”
The regulator’s final guidance defining thresholds around generic, simplified or ‘focused’, and full advice, published in January, states that processes involving a limited selection of relevant products will still fall under the same requirements as full advice.
Generally, the paper set a key determinant of whether an interaction would qualify as advice as being when a product recommendation is made. It even suggested some newsletters or other group contacts could cross the divide into advice, triggering liability for any subsequent action taken by the client.
Mr Hood commented that simplified advice is still not clear and that the industry and trade bodies should write things down and come to an agreement on what can be said.
“This would enable a proper pathway to advice, with generic guidance providers permitted to refer people to advisers to complete transactions. People would feel more confident and better equipped to use financial advice when they needed to.”
Also on the agenda was the idea of a digital passport. David Dalton-Brown, Tax Incentivised Savings Association director general, said this would be a voluntary system whereby consumers would give a limited amount of identification data to a central body, which would then share this with third parties to enable easy opening and transfer of accounts.
He expressed frustration that it was easier to access loans and finance than open even the most simple of savings accounts, with important anti-money laundering regulations still creating too much paperwork and administration costs that are ultimately borne by consumers.
A development group has already been set up within Tisp and a prototype of the system will be built and tested later this year, based upon existing e-identification technology in place for passports and benefits, he said.
A third proposal from Tom McPhail, Hargreaves Lansdown's head of pensions research, was the removal of the lifetime allowance - “a policy that has run its course” - and focus on the annual allowance, along with using savings to fund incentives and increase contributions for low earners.
There have been growing calls for the lifetime allowance to be cut and, for example, the annual allowance lowered and potentially set at a flat rate to prevent higher earners disproportionately benefitting from tax relief.
Labour plans to keep and lower both the lower and annual allowance if it is elected in May. The Tories have yet to signal their intention with the reliefs.
Mr McPhail said: “There is a perception of unfairness around the fact that a big slice of tax relief is going to higher rate payers... I don’t think incentives are working either, so we need a specific and fair reason to save; especially for those on low and middle income earners.”
He added that proposals must be cost neutral and evidence-based, as “the last thing we want to do is raid pensions to pay for other policies”.
Auto-escalation of pension contributions was also revisited, while JPMorgan Asset Management managing director Jasper Berens also suggested a more co-ordinated approach to financial education.
He suggested that the government should create a single body to organise the message on consumer financial capability, leading into the final proposal for a new savings minister to be created by the next government.
peter.walker@ft.com
