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BBA’s Anthony Browne: Why we need simple products

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I previously spent many happy years working as a newspaper journalist, a craft where one of the trickier skills is whittling down complex information into straightforward, easily digestible sentences.

 There are parallels between my former life and one of the most important innovations currently being developed by the banking industry. Earlier this year, Carol Sergeant, a respected former Lloyds Banking Group executive who previously worked at the FSA and the Bank of England, published a Treasury-commissioned report on how our industry can deliver more simple products for customers.

 Her review marshalled the thoughts of banks, consumer groups, the regulator and the Government on identifying, structuring and bringing these products to market.

 The review’s final report called for a simple products badge with an independent accreditation process. Another body would scrutinise that system’s effectiveness.

 We in the banking industry are fully behind these proposals and I do not say that because I sat on the Sergeant Review’s steering committee.

 To restore trust in our industry, it is vital that custom-ers can manage their financial affairs with confidence and ease. Given that the Sergeant Review’s final report was published in March, you might wonder when simple products are set to hit the high street.

 Such important measures cannot be drawn up overnight. The banks are currently working hard on a quality assurance system for these simple products.

 Customers need to feel confident that a product badged as “simple” will be just that. Financial services companies must be assured that the accreditation process is effective and that it works in harmony with regulation overseen by the FCA.

 The banking industry is set to report back to the Treasury next March with detailed proposals of how the new system should work. I am encouraged that this initiative will be immensely useful to consumers and also help revive trust in our banks, but I would sound a note of caution to customers and providers.

Vital though this initiative is, it cannot – and should not – be seen as a silver bullet that will ensure no misselling ever takes place in the future.

While simple products would be designed to be sold without regulated advice, every customer has individual circumstances and needs. It will be important to provide them with necessary information to help them make an informed choice when buying a simple product. For example, it may not always be appropriate to prioritise saving over paying down high-cost debt.

 But while simple products are not necessarily a safe harbour from misselling, they have the potential to become a trusted benchmark on which millions of customers can rely.

 I look forward to seeing the introduction of this very valuable initiative.

Anthony Browne is chief executive of the British Bankers’ Association

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Simplified products will never fly. A committee has already tried and came up with, for example, nothing more imaginative than LTA without Premium Protection ~ big deal. The Conservative party pledged in the run up to the last election that it would sort out the tangled mess of the current pensions framework but has done nothing but introduce further restrictions and press ahead with AE. Regulation has continued to increase exponentially, leading to an advice gap about which the FCA has admitted concern but has so far come up with no proposals to address it.

    Meanwhile, Tracey McDermott has claimed that the FCA doesn’t want to over-burden small IFA’s with compliance ~ despite doing exactly that by imposing its own prejudgements on the possible outcomes of just about everything that we do. This state of affairs seems be worst of all for members of networks, who now find everything they try to do is criticised, declared defective and generally ripped to pieces. What are such policies actually achieving that’s of any practical value? The future is unknown and unknowable.

    For its part, the FCA brushes aside complaints about the totally OTT burdens of its GABRIEL returns by describing the data they demand as “pragmatic” ~ utter cobblers.

    Meanwhile, the really big motorway pile-ups continue to emerge, the FCA continues to escape accountability and continues just to dump onto the FSCS the costs of mopping up the fallout.

    What is needed is not simplified products but a simplified advice process based on four fundamental principles ~ Proposition, Costs, Risks and Tax. What’s the point of setting out in exhaustive, complicated and costly detail the likely adequacy or otherwise of a £150 p.m. savings programme if £150 p.m. is the limit of the investor’s budget? It’s a waste of everybody’s time and money ~ still, it seems, the regulator’s two biggest raisons d’etre.

  2. Is it just me or is Anthony Browne’s comment below the wrong way round?

    “For example, it may not always be appropriate to prioritise saving over paying down high-cost debt.”

    Surely the norm should be to prioritise paying down high cost debt so that eh exception becomes NOT paying off the debt?

    As to simple products – A Terms of Business (or whatever it used to be callled) was one side of A4 in 1990. How many pages is it now? Key Features Document was 2 sides, how many is it now? Fund details were 4 lines, now it is a KIID which is pretty useless and a fund fact sheet.
    A suitability report (originally justification letters) was 2 sides, how many is it now……..

    The advice is the easy bit of the job, it’s getting together all the crap that the client doesn’t read that is making the cost of advice so expensive…..

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