The collective mindset of theorising bureaucrats is a thing of wonder and never ceases to provide both irritation and amusement, not always in equal measure.
Such thoughts neatly lead to the steering group on simplified products which will, by now, have reported back to Mark Hoban.
No doubt, he will shortly recommend the implementation of a raft of simple “McProducts”. Of course, this has been attempted previously with stakeholder pensions and CAT mortgages and we all know how enticing these were to Joe Public.
I am all for simplicity, particularly if it involves the removal of paragraphs of guff from brochures, reduces illustrations to one or two pages instead of between four and 10 and rids the world of pointless minutiae that nobody, not even the average adviser, is brave enough to trawl through. Looking back, we can identify a parallel between the insidious creep of regulation and the increasing length of brochures, etc, so it seems that the current focus has almost certainly missed the prime culprits.
There are three questions that require answers. What is a simple product? Will such a product be better or as good as existing versions? Who is expected to sell or otherwise distribute these plans?
The original thinking behind stakeholder envisaged a simple, flexible and cheap product which would be sold by volume outlets such as the banks. This notion was squashed by the FSA’s insistence that advice on simple products must meet existing compliance levels and that such advice would continue to be subject to FOS interpretation.
Stakeholder pensions were promoted as simple products which would be lapped up by consumers applying direct to providers. However, the expected surge of interest never materialised.
So, if the consumer refuses to buy, then it is down to the industry to persuade or sell to them.
Of course, one of the previous big ideas was the removal of the marketing allowance in a bid to reduce the cost. The RDR will achieve that at a stroke apart from that bit that the RDR missed – protection products.
I am told that the thinking behind the design of a simple term insurance is to remove waiver of premium, guaranteed insurability options and terminal illness cover. So, back to my previous question, who will sell such a plan? I cannot imagine recommending an inferior plan simply because it has been stripped down and, presumably, made a tad cheaper.
The collective mindset imagines a nirvana where trusting consumers willingly engage and purchase products without intermediation. Will this work? Will the MAS be able to deliver confidence and point consumers in the right direction? Will it possess the required skills to persuade consumers to protect themselves and their families?
The weakness of these assumptions is the proven inability to persuade unwilling consumers, which brings us back in a circle.
Mark Hoban wants,“simple, easy-to-compare products to be introduced to encourage more consumers to enter the financial services market”.
A far more likely scenario is that this proves to be yet another costly white elephant which swiftly creates mortification and handwringing. An embarrassment only partially mitigated by the knowledge that the financial consequences have yet again been borne by the industry while the guilty unaccountable culprits trundle off to further cosy sinecures.
Alan Lakey is partner at Highclere Financial Services