The first time I met Paul Lewis, the Radio 4 Moneybox presenter and perhaps one of Britain’s most influential financial journalists, he told me that he felt the only way to improve financial services was to place the consumer first at all times. Indeed, I often boast that my businesses succeed because we put the client first and this year’s profit a bit behind.
A decade later and the cost of most of the then overpriced financial services instruments has plummeted. It certainly was not any reforming zeal amongst the product providers – public opinion, regulatory pressure, the internet and intensifying competition have reduced average charges for the things everyman needs, regularpremium pensions, investment and protection. To a background of regular scandals generally perpetrated by the market’s biggest firms, the consumer’s advocates have dictated the pricing agenda very successfully and won the consumer a far better deal.
So this is good news. Or is it? Has it gone too far? I only ask because far fewer people contribute to private pensions, save regularly and protect themselves and their dependants against the financial effects of death or disability than did when prices were higher. Pile it high and sell it cheap has not worked. Some would blame all the scandals, but in truth they would not stop people doing the right thing, unless people were very happy not to do anything at all.
In fact, I wonder if the new Money Advice Service, and John McFall’s dismissed call for price controls on private pensions, might not one day be seen as the high water mark of the state’s effort to help us to help themselves. Of course, we have Nest to come, but in terms of new initiatives, the penny might just be dropping that while low charges and online explanations might help the wise few, they do not achieve virtuous financial behaviour in enough consumers for society to be successful in the long term.
I wonder if policymaker consensus is not forming that what is needed to serve consumers best is the responsible marketing of financial responsibility. As that cannot now be state-funded, then logically consumers would have to pay enough in charges to allow those who sell to them to build budgets capable of delivering changes in behaviour. Now there is a challenge – should those who buy pay a bit more, so that those who sell can get more people to buy and thus improve the nation’s financial health? The alternative is to do nothing or attempt to inflict compulsion on a nation deeply disrespectful of all those who might compel. That is only likely if the Government has given up all hope of a responsible, regulated free market delivering contented savers.
And while, given all the historic pain the larger financial services sellers have caused consumers, that might well be where many opinion-formers are, I suspect the decision-makers in Whitehall and Canary Wharf are retreating from the McFall-like certainty that cheap is the only way, and beginning to think that it might best serve the consuming public if they let those who sell make what profit the regulated market allows them and thus gain the power to market their versions of financial responsibility to the public. It means allowing the marketers a corner, while the FSA ensures that rogue rippers-off are found out fast. No matter how big they are. A pipedream Paul, or the way it should always have been?
Tom Baigrie is managing director at Lifesearch