UK financial services may need to review its business model as the savings sector is regarded as a "middle-classed market", suggest panellists attending a Labour Party Conference fringe meeting.
Speaking in Manchester yesterday as a member of the panel debate on financial inclusion, Ann Rossiter, director of the think tank Social Market Foundation, chaired and summed up a discussion about the need to encourage financial inclusion by suggesting the financial services industry is seen as being geared towards the middle classes.
A key comment delivered by Rossiter at the end of the forum questioned whether and to what extent the structure of the financial services market and its current business models “could or should be reviewed” in order to tackle financial inclusion.
Her comments followed earlier criticism of the financial services industry by fellow panellist and Treasury Select Committee chair John McFall MP, who said the savings market is seen as a middle-class market and who further claimed much of the £35bn in retail financial services sales is recycled or “churned” money which is already in the system rather than new investment.
In an additional swipe at financial adviser commission, McFall also acknowledged financial service providers do have upfront costs to cover but questioned whether commission is a hindrance to helping low income families gain financial advice, as well as whether advisers should receive trail commission for activities completed many years ago.
A spokesman for Standard Life says the life office’s chief executive Trevor Matthews spoke in defence of the industry, and stressed “churning by financial is not necessarily bad as A-Day and the advice delivered gave the public more opportunities and a better deal” than those they may already have held.
Matthews said while the UK financial services industry is perhaps of the most sophisticated in the world, complexity which leads to financial exclusion is not necessarily the fault of the industry as he notes there can be as many as “100 different parameters” to calculating the UK state pension.
He also pointed to a lack of public interest in financial services products as being a key contributor in the consumer’s lack of knowledge on matters such as pensions, as he suggested while people might be able to work out complex bets on horse races, the level of “disengagement” means they can’t work out their pension.
In order to combat low levels of financial protection for those people who need it most – a situation described as “criminal” - Matthews argued the UK should should consider basic protection in the debate around the NPSS, as Australia included a “term assurance element” when its compulsory pension system was introduced.
Brian Pomeroy, chair of the Treasury working group on financial inclusion, also added while there were around three million people with no bank account three years ago, part of the problem still appears to be an issue of trust of financial institutions while other consumers do not believe bank accounts are suitable for them.
Vernon Everitt, director at retail themes at the Financial Services Authority, suggested a contributing factor to financial exclusion is people find it difficult to engage with the financial services industry but believes the drive to get financial education on the national curriculum will support future development of consumer knowledge.
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