However, coming up with a solution is rarely straightforward, not least because when it comes to the social sphere the issues involved are rather more are grey than black or white.
Even the judicial public inquiry held into the practices of the British press prompted stark division between those seeking protection from unpardonable intrusion into their private grief and those fearing the far-reaching implications of limitations binding the freedom of the press.
The financial services industry has its own spectres, the perception that it is wholly motivated by vested interest and greed being tough to deny. How can consumers feel better protected from what many see as high-pressure selling tactics?
Most recognise that they need to equip themselves with appropriate products that have the capability to meet their short, medium and long-term financial requirements, but then say they are deterred by the complexity of what is on offer.
The quick but less than helpful answer to the dilemma is to ‘consult a professional’. But what are the options? In my view, the first step is to understand more – and nowadays, with the internet providing easy access to anyone interested, there is myriad information available. Some in the industry regard this as a potential threat to professional advisers, but I do not share that opinion. Many private investors of modest means clipped out the coupons of fund managers’ newspaper advertisements in the 1970s and 1980s with the result that they gradually built up meaningful unit and investment trust portfolios. It is those arguably better-informed individuals who are the most likely to seek professional advice when they realise their need for greater professional input as their priorities change.
The publication last April of the final report of the Sergeant Review on simplified products brought to the fore some interesting points. An ‘easy access’ savings account was proposed as well as one requiring 30 days’ notice with regular savings versions running alongside. A fixed-term life insurance product was also put forward, while work on income replacement and whole of life contracts continues, all with standardised terms. The overarching requirement was that all ‘simple’ financial products will need to comply with an agreed set of high-level principles, embracing product features, language, terms and conditions, pricing transparency, purchasing process, as well as regular information and product updates.
This amounts to positive news, especially for those consumers in the vast population ‘gaps’ where few savings and protection products have penetrated hitherto - but what about the ‘straightforward and clear purchasing process for the consumer’ that the report demands?
Unlike the ideas put forward by Ron Sandler in 2002, the Sergeant proposals have entered a very different communications landscape. Today, a plethora of broadband, social media and mobile applications exists, all of which potentially represent distribution game changers.
Experience of watching the development of the Isa over time would suggest that consumers willingly embrace simple, flexible and understandable products. More importantly, they remain engaged, buying more over time – and this has come about despite the fact that most Isas are bought rather than sold. People buy them because they understand them – and this process is, in my opinion, transferable to other products.
There have always been some enthusiastic private individuals who are genuinely interested in financial services and opt to make their own decisions. Accordingly, growing numbers of execution-only services are busily honing their client propositions to serve this audience. The sense is though that there are many others whose unwillingness to pay for professional advice is driving them into the same client category. Whatever their motivation however, all audiences should receive access to the same full disclosure of costs and charges in line with the RDR standards pertinent to the advisory market.
However simple and straightforward the product though, if growing client expectations are to be satisfied, higher standards of service must apply, whichever access route the client chooses. Certainly, improving technology is stepping in to allow product providers to enhance their client service proposition - but some companies remain alarmingly slow to recognise the need to collaborate with their peers if they are to succeed. One such pan-industry initiative is TeX (Tisa Exchange Limited), a ‘contract club’ established to facilitate the electronic transfer of assets. It includes not only management firms but all the major third party administrators and transfer agents – and building on this success there are calls now to extend the scope of the service to incorporate offshore funds and pensions too as news of TeX’s key role in dramatically reducing the time it takes to transfer and re-register client assets travels further afield.
Raising standards, building trust, simplifying products and improving levels of efficiency are pre-requisites if the UK is to address one of its biggest issues: under-saving.
Tony Vine-Lott is director general of Tax Incentivised Savings Association
