Regulation  

FCA casts doubt on ‘simple products’ initiative

A much heralded review into the introduction of a ‘simple’ financial products kitemark that would apply to a range of consumer cash accounts and insurance policies may not result in “tangible changes for consumers”, the Financial Conduct Authority has warned.

Speaking at the Tax Incentivised Savings Association annual conference in London yesterday (13 November), Chris Woolard, the regulator’s director of policy, risk and research highlighted the recommendations of the Sergeant Review earlier this year, saying it “remains to be seen” whether this cane be “transformed into tangible changes”.

Mr Woolard said the review was built on the “premise that when consumers arrive at the financial services marketplace, there should be simple processes and products available that will allow them to make a straightforward purchasing decision”.

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Published in March, the review, which was undertaken by a steering group led by former Financial Services Authority managing director Carol Sergeant, recommended the introduction of a “simple financial products badge for qualifying products via a robust accreditation process”.

This would be applied to a range of new ‘simple’ products, including an easy access savings account, a 30-day notice savings account, a regular savings account, and a fixed-term life insurance product. It also recommended the introduction of a new whole-of-life insurance product, but said there was a need for further consultation with the Association of British Insurers.

All of the products would adhere to an agreed set of principles, covering features, language, terms and conditions, pricing transparency, purchasing process, and product updates, it said.

Mr Woolard argued that in fact the problems faced by consumers that led to the review could in fact potentially be solved by a “cultural shift”, highlighting a regulatory focus on consumers being caught out by “clauses hidden in terms and conditions”.

He said: “While our rules don’t specifically require firms to develop simple products, we recognise that simplicity can help to build consumer trust and engagement, and encourage product comparison and shopping around.

“What remains to be seen, however, is whether the foundations built in the Sergeant Review are transformed into tangible changes for consumers. It is something that requires the ongoing commitment of all participants, particularly industry.

“We must not rule out, of course, the possibility that the solution to this problem is simply one of a cultural shift. Too many times we hear of consumers caught out by clauses hidden in terms and conditions or of products sold that don’t meet their needs.

“That culture of terms and conditions designed solely for the firm has to change.”

Mr Woolard said the regulator was working with consumer groups and was focusing in particular on “vulnerable” consumers, highlighting cases such as a woman who was diagnosed with cancer and had to give up work, but was refused a mortgage payment holiday because she had not missed any payments.

He said: “Put simply, we expect firms to treat customers fairly when they are dealing with people with vulnerable circumstances.”