Simple products reveal a more complex problem

Bethany Rutter

If one of the results of the Sergeant Review into financial services was the potential for the introduction of a kitemark for ‘simple’ financial products, then that’s surely just the tip of the iceberg.

Such a kitemark would apply to products including savings accounts and a recommended newly-introduced fixed-term life insurance product. What this would entail is a ‘robust’ accreditation process, comprising features, language, terms and conditions, pricing transparency and the purchasing process — but shouldn’t these come as standard anyway?

It is partly being suggested in response to a regulatory focus on consumers being caught out by clauses hidden in terms and conditions, or being sold products that do not fit their needs. There are few excuses for a customer being mis-sold products, and creating a line of products that would be marketed as essentially impossible to mis-sell by virtue of their simplicity rather than greater honesty in the selling process seems like a quick fix.

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Instead of cornering off part of the market as being ‘simple’ for consumers with less financial knowledge and education, it would probably be preferable to take one (or both) of two paths: a greater level of financial competency among the product-buying population, or a cultural shift towards transparency and simplicity in all products where possible. Creating ‘simple’ products could discourage consumers from doing the appropriate research or, worse, from getting the appropriate advice where they need it, because they know they can rely on these as a ‘safe’ option.

More to the point, sometimes ‘simple’ isn’t preferable. There’s every chance that a product could be necessarily complex in order to deliver the features or benefits that a consumer would choose it for. Obviously, language itself need not be unduly complex, but there will always be terms and concepts that are new to the untrained consumer.

What, surely, financial services that can be bought direct by consumers should be aspiring to is either a clear and transparent purchasing process, or a better-informed population, and creating a ‘simple’ seal of approval won’t fix either of those.