James Hay’s chief executive has said that the industry must first close the communication and language gap, before tackling the advice gap, as “until we bridge that, we are just having a conversation with ourselves”.
Speaking to FTAdviser, Alastair Conway said: “There is an advice gap, but our biggest gap is communication and language and if you bridge that, I think the advice gap would look a lot less wide than it does today.”
Commenting on the Financial Conduct Authority’s smarter communications paper, published this summer, he said that it is key that the regulator provides an environment in which innovation can occur.
Mr Conway argued that the language used by firms is often is confusing and must instead become more simplistic. In terms of what James Hay is doing, he said this message of simplification is being spread throughout the company.
“We are not reinventing the wheel here, it’s about trying to be simple in the way you describe things and simple in the way you use the language.”
Mr Conway added that he thought there was a case for testing and challenging people as to whether they really understand the implications of what they are going to do.
“At the moment I think the danger is its so bureaucratic and so detailed, most people if they went through the test at the end would go actually ‘I’m not sure if I did’ but I don’t think that’s the advisers fault because they are so constrained in the first place.
“It’s about simple language, rather than technical jargon, which gets you then into a conversation about answering what people are bothered by, which is ‘do I have enough money to survive?’, ‘could I lose all my money?’, ‘should I leave enough money to my family?’, or ‘can I afford to buy a house next year?’.”
Yvonne Braun, director of long-term savings policy at the Association of British Insurers, commented that the pension freedoms have made the need for plain and simple consumer language even more pressing.
“Following the reforms in April, the ABI has convened a Pension Language Steering Group which is working on reducing jargon and agreeing standard terms. This is a broad coalition of representatives from government, regulators and guidance providers as well as the pensions industry and advisers.
“Communicating as clearly as possible should help people understand their options, but there will always be a need for good financial guidance and advice, appropriate to an individual’s circumstances.”