Financial products of the future will have to be simple, Chris Hannant, director general of the Association of Professional Financial Advisers, has said.
Mr Hannant said: “Changes to the regulatory landscape and to the way consumers access advice are driving innovation and the development of products. But a crucial consideration for the products of the future must be simplicity.
“There is a desire among the industry and consumers for products which are easy to understand and easy to track.”
He said language also needed to be simple, so that better conversations between advisers and customers can take place.
His comments followed research authored by industry experts and Apfa, which found that simplicity would be the way to grapple with the changing financial sector. The two-page report, part of a series of short reports published to mark Apfa’s 15-year anniversary, said attempting to distribute some of the more complex finance products is like “selling Michelin star-priced food in a Happy Eater”. It goes on to say: “The reality is that people want to plan a retirement they understand. They don’t want hassle.”
Brought into effect in January 2013, the retail distribution review introduced a series of new rules for the financial advice sector. Following this, the government introduced auto-enrolment for pensions, and announced it will be bringing in freedoms for pensions.
From April 2015, the freedoms will allow people aged 55 or over to take all their savings out of their pension fund if they wish.
Alan Higham, retirement director at Fidelity Worldwide Investment, co-author of the report, said: “The recent changes to defined contribution pensions are the biggest since the regime was introduced in 1921.
“But what could this mean for products? Looking ahead, the crucial issue here is whether auto-enrolment works, and people embrace the need to save more. If they do, then from a product perspective we may see no more than tinkering.”
Adviser view
Barry May, director of South London-based Oak Financial, said: “You can have the most simple products in the world, but unless people understand the complexity of their own position it will not make a difference.
“Irrespective of how simple things are, people have got to be honest about what their income is and what expectations they have.”
Report co-authors
Steve Lewis, head of distribution for LV= Retirement Solutions;
Eugene Philalithis, portfolio manager of Fidelity’s multi asset income fund range;
Alan Higham, retirement director at Fidelity’s Worldwide Investment;
Graham Duffy, care specialist (retirement) at Partnership, and;
Andy Couchman, co-chairman of Protection Review.
