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Providers failing to meet product demand: Equitable Life

Providers failing to meet product demand: Equitable Life

More innovative products are needed to ensure consumers are getting good returns in the current low interest rate environment, Equitable Life has said, adding that the industry has not “got to grips” with consumer offerings.

Speaking to FTAdviser, Chris Wiscarson, the firm’s chief executive, said that the financial services industry as a whole has not had the greatest run for the last 20 years, with various mis-selling issues, including pensions and mortgages, along with more recent payment protection insurance and swaps.

“My starting point is that we are getting what we deserve. Given our history, we have been in a period of now getting on for 20 years very low interest rates and the industry has not yet got to grips with the customer offering in a very low interest rate environment; not until today.”

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He added that the consumer has seen how to deal with the low interest rate environment by buying property, adding that auto-enrolment seems to have been an extraordinary success, showing that the government has stepped in where the industry has not come forward.

“In very simplistic terms, the financial industry’s job is to help consumers have enough money when they need it and, in particular, savings to maintain a decent standard of living in old age,” Mr Wiscarson stated.

“Many consumers have demonstrated a pretty shrewd understanding of this by investing directly in property, while the government has been responsive by the introduction of auto-enrolment.”

Focusing on annuities, he pointed out that in a low interest rate environment, the price of insuring oneself against living too long is simply too high.

“Two prime areas of innovation have been drawdown schemes and enhanced annuities. As enhanced annuities became more and more mainstream, that simply put the cost up for annuities to healthy lives.

“In the absence of any greater innovation, the chancellor cut the ‘Gordian Knot’ by his pension reforms.”

Mr Wiscarson said he struggled to see where the pensions and life industry would get its inspiration from in the future, but stated that he would like to see more innovation around a drawdown combined with an insurance policy that would pay out if one or other pensioner were alive at some point in the future.

Kate Machin, chartered financial planner at Walker Crips, told FTAdviser that she thought it was unfair to place the blame on product providers.

“How are providers meant to come up with more innovative capital secure products delivering good returns when interest rates are so low? Clients would do well to remember the risk versus reward trade off.

“We appreciate things are worse for cash savers but everyone is in the same boat. If they take professional advice there are still some suitable products around to suit their needs.”

She added that even if things improve with interest rates, the firm does not believe clients should keep long term savings in cash.

ruth.gillbe@ft.com