Product summary boxes along with a "traffic light" product risk assessment system are two of the proposals which are now expected to be presented by the Treasury Select Committee, to tackle consumer confidence in long-term savings.
Although it could be some time before the report is actually delivered, the pattern of questioning and information over the last four weeks now suggests the TSC has already decided what it would like the financial services industry to do to improve take-up of financial products, regardless of feedback from sessions suggesting some of the TSC’s ideas are simply not possible to implement.
Even though many guests in front of the panel clearly set out why they believe the development of a standardised ‘traffic light’ red, amber and green risk assessment system would NOT work, MPs appear to be unhappy with the answers they receive.
Yesterday’s session was no exception as the chief financial ombudsman, Walter Merricks, told MPs such a system would not work because it would require several more ‘colour codes’ within the formula, and would not reflect the constantly changing nature of active financial services products. Merricks was also quick to point out no risk assessment system was really going to work unless consumers began to understand risk assessment and how a product’s risk can change on a regular basis.
Given the ferocious nature with which the TSC pursues its own idea, it would be fair to say there are now three clear issues which we can expect to be included in its final report once all evidence to the TSC is completed:
- Proposal for the industry to develop KFD “summary box”
- Proposal for the industry to develop a “traffic light” product risk assessment;
- Strong condemnation of the AIFA for having no code of practice under which it would pursue “sharp practices” by IFAs.
Over the past four weeks, these are the three issues which re-occur and are pressed at each question session.
Despite comments from the FOS - pointing out most trade bodies across a range of industries do not have a code of ethics or conduct - MPs seem to be desperate to condemn the AIFA for not being able to prevent Berry Birch Noble’s “sharp practice” of shifting assets from one division of the firm to another.
Given the line of questioning the TSC has pursued and what appears to be very poor knowledge of the financial services industry, it is difficult to see why industry representatives are prepared “to give evidence”. If the TSC has already decided what it thinks voters want to hear rather than what might be possible in financial services, there doesn’t appear to be any need for people to be subjected to what seems on most days to be a witch hunt.
Yesterday's session showed signs of tackling one issue that IFAs would really like to see addressed but was quickly shot down because it didn't appear to fit the agenda other MPs had.
Merricks was asked about the lack of appeals process following an ombudsman judgment and whether it was legally correct to have a system without the right to appeal. It's the question every IFA would like to put to the FOS. Unfortunately, as soon as Merricks began to speak another MP quickly moved to shift the focus again to another matter.
Such tactics tend to suggest committee meetings are designed to grab national newspaper headlines rather than come up with any original ideas for tackling the savings gap or problems within the financial services industry. If this is really what is going on, the industry may need to do more to point this out to consumers, and perhaps turn the tables on MPs determined to improve their own profiles.
Do you agree with the TSC standpoint? Is it possible to produce a standardised product risk assessment system? What do you think is the aim of the Treasury Select Committee?
If you have any comments you’d like to add to this or any other issue, either post them on the IFAonline discussion board or email the editor who will post them on the board for you.
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