This morning's publication of the Treasury Select Committee report into long-term savings confidence has challenged the financial services industry to develop a series of new initiatives in the hope it will boost consumer confidence in the long-term savings market.
What the report does not obviously show, however, is while much of the evidence presented to MPs at its oral meetings is included in the report, the approach many firms would see as common sense has been ignored or viewed as companies looking to protect their own interests.
Details of its Restoring confidence in long-term savings report – compiled as a result of several months of written and oral evidence by financial services firms, IFA, trade bodies, consumer groups and regulatory officials – appear to be tipped very consciously in the direction of consumer interests rather than picking up on some of the common sense issues raised by the finance industry.
The report emphasises what now appears to be a great mistrust of financial services firms, as the TSC suggests consumers now trust their local supermarket more than they trust the largest life insurers but suggests the solution to this is push ahead with the simplified suite of products and leave the FSA and FOS as it is.
Moreover, IFAs come across as the ‘bad guys’ in the selection of financial services products as the TSC suggests they hinder the information process between companies and its clients.
The TSC has suggested one solution to a lack of consumer confidence would be to provide simpler, more transparent information – such as a ‘simple’ standardised risk indicator and summary box along with other measures, rather than any further development of or changes to the regulatory regime, as it believes lack of confidence was created by the previous regulatory system – PIA, etc – rather than today’s Financial Services Authority.
In reality, the Treasury Select Committee actually has no powers to enforce any kind of “challenge” so many of its meetings over several months appeared to have been designed to put pressure on companies and trade bodies to change certain practices through public humiliation rather than enforcement.
One such issue which played out in this manner is the TSC’s criticism of the Association of IFAs, as the TSC felt it was wrong the trade association has no code of ethics enforced on its members.
This issue has arisen again in the report formally published this morning, along with other ideas which the industry had predicted would arise, such as suggestions there should be a ‘traffic light’ style – red, amber, green – risk indicator for all products.
The ‘traffic light’ risk indicator concept for example – currently used on endowment investment statement letters – was rigorously pursued throughout the oral sessions by TSC member Angela Eagle MP even though everyone giving evidence, except the FSA, said would not work because three levels of risk would not be enough to represent most financial products.
IFAs are likely to be disappointed to know the TSC does not think an appeals process should be added after Financial Ombudsman Service decisions are made, as too many consumer bodies said it would spin out consumer cases for too long.
Similarly, the only regulatory change proposed by anyone giving evidence was to money laundering regulations, so the industry is as much to blame if it says regulations are burdensome but then doesn’t suggest what should be changed.
Even though this is a high-profile report and is splashed as the only major finance story this morning, advisers must remember these are only recommendations and can be nothing more. In reality, the title of the report tells us the findings were always designed to criticise the industry, support the (Labour Party-introduced) FSA and rally to the voter cry of consumers.
The Treasury Select Committee has correctly come up with one or two ideas which would perhaps help consumer confidence, such as the summary box and changes to money laundering. But in a week’s time, most consumers will have forgotten the report and newspaper headlines.
IFAonline has broken each section of the report down, so readers can see the key points or details of the TSC report, and will publish them throughout the day.
Click thru the attached stories to view past coverage of TSC meetings and feedback.
Commentary: when political soundbites are more important than progress (9/6/04)
700,000 complaints are time-barred alleges Treasury (8/6/04)
Condense KFDs into a summary, says Select Committee (26/5/04)
Editorial: the AIFA "grilling" was theatre, not politics (12/5/04)
Treasury Select Committee to refer AIFA fundings to the OFT (11/5/04)IFAonline
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress