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Govt calls on industry to develop simple products


The Government has called on the industry to develop simple savings and protection products as a priority as it launches a consultation on simple financial products.

The consultation, launched today, looks at proposals that will promote personal responsibility and enable consumers to better compare financial products.

The Treasury says previous experience with simple product initiatives, such as CAT standards and stakeholder products, has demonstrated the Government is not best placed to design products that are profitable for providers and straightforward for consumers.

It says initially simple products should be focused around those that do not pose any risk to capital, i.e. not investment products.

As a result the Treasury says simple savings accounts and protection products should be developed first.

The Treasury says it is keen to ensure that complexity is not a barrier to saving, and also wants to see the development of simple term life assurance, critical illness and income protection products.

Treasury financial secretary Mark Hoban (pictured) says: “The Government believes that there is a compelling need for the financial services industry to offer a range of simple products, both to help consumers understand the choices they face, and to provide a benchmark against which all consumers can compare the many thousands of products in the market.

“The Government has learnt the lessons from previous simplified financial products. We do not want to design these products, nor do we want to cap the charges that product providers can charge – competition between providers should ensure that there is healthy competition on price, service, and customer experience.

“I very much look forward to seeing simple products develop in a way that is beneficial to consumers, to industry, and the UK as a whole.”

In the paper the Treasury says it believes simple products should be straightforward enough to be bought without regulated advice. It argues that as consumers have increasingly turned to the internet and comparison websites for product research, the focus will be to deliver simple products through non-advised channels.

Advisers will still be able to sell simple products, or use the products as a benchmark tool. But the Treasury says this is not the primary focus for simple products.

The consultation closes on March 25.

Money Marketing’s Pave the Way to Save campaign is calling for policies which encourage greater consumer access to advice to help more people engage with savings products and protection policies.


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. Mark Hoban should go shopping with his wife more often. Supermarkets for several years have been offering simple savings and protection products as have banks, building societies et al.

  2. God help us all if this man has much further say in financial services. As the previous cooment indicated there are numerous savings and protection products that already fit the criteria he is demanding.

  3. I think it is fair to say that there is a whole plethora of simple products already available.

    Is not the ever changing legislation that leads to confusion, misunderstanding, fear and inactivity of potential savers and investors?

  4. What CAT standard, stakeholder etc consistantly fail to recognise is that simplicity is not the issue it is access to advice. Many grown up business people who make a fortune in their specialist area cannot balance a cheque book and have no idea how much life insurance they need or what it should cost so what hope the great British public?

    The other issue is constant change. Especially in long term savings: PEPs, ISAs, TESSAs, then how many pension changes have we had? The govt. moves the goalposts so regularly it destroys confidence then they blame the industry when the public is confused and reluctant to act against a backdrop of uncertainty…

  5. Here we go again. Where does this guy spend his days? Does he really know nothing about this industry. It’s just unbelievable.

  6. I wonder if the ‘Government’ has done any research to actually see if there is a genuine need for such products or is this a just another arrogant assumption?

    On one hand there is a serious commitment to educate consumers and on the other hand this proposal to spoon-feed the public as though it was thick and not able to make informed decisions whereby the onus on advice/product information rests with firms.

  7. Why is this bancassurer minister able to get away with this? Why are our businesses at risk because of the opinions of this one man. Who the hell is he anyway, never heard of him before he took up this role to promote bancassurers. Stakeholders didnot work under labour, why cannot this new labour minister stand down and let a proper tory who supports small business do his job properly.

  8. Simple/sane reguation would be a better idea.

  9. The government contribution to simplification was stakeholder which was so easy and straightforward that apparently it didn’t require advice or remuneration for advice because it could be purchased with the aid of a decision tree! The trouble was the decision tree became “decision trees” and these trees grew into a wood and the consumer couldn’t see the decision tree for the decision wood! The net result of government intervention was the removal of distribution costs and hey presto the removal of distribution. This shows us that intangible products are sold and not purchased and yet in spite of the Stakeholder fiasco FSA/Treasury intervention has take financial services industry once again to the edge of an abyss, with Mark (rubber stamp) Hoban MP pushing ever harder over the edge. RDR proves that a regulatory fool doesn’t learn by their Stakeholder mistakes!

  10. I work for a product provider and help develop CAT marked ISA, Stakeholder, CTF’s and Sandler MTS. I will be making sure I steer well clear of any projects assuming my employer is daft enough to spend a fortune developing

    1.Products with restricted margin

    2.Liable to wrecking by FSA regulation

    3.Withdrawn by the next government

    Meanwhile the govenment does everything it can via the RDR and the tax system to wreck product attractiveness to consumers. I’m really woried about my job because I think we could see a meltdown of providers. Perhaps I will have to raise my sights and become an adviser?

  11. There is a simple savings product…It is called a Bank or Building society savings account! These do not generate commission or fees and have little risk.
    Simple 10yr plus equity based savings plans have all but gone due to advice needed, which is no longer viable in the 1% world.
    85 life companies that used to provide simple savings and protection products have left the UK because of the 1% world and compliance costs.
    The majority of people are not prepared to pay a FEE to take out a £100pcm savings plan regardless of the qualifications of the IFA and until the balance is struck between the Product/provider, client and IFA wont work..
    The economics are like a three legged stool, if any area falls out of balance the whole exercise will fall over as the last 12 years have proven.

  12. How about simple Government and tax to start with?

  13. When will that man (and many many others) realise that most people in the public do not want to buy financial products from a website or off the shelf. Pensions and protection products especially, are sold with advice, not bought.

  14. “richard wright | 14 Dec 2010 5:48 pm

    When will that man (and many many others) realise that most people in the public do not want to buy financial products from a website or off the shelf. Pensions and protection products especially, are sold with advice, not bought.”

    I hate to disillusion you but of course the public buy from websites – I work for a provider of those products and they are very successful. What you tend to find is that when someone realises they need life insurance, usually when they buy a house or have a baby, they are quite capable of doing it all on their own despite what IFAs fondly think. And a large proportion of them would rather do that than talk to somone they don’t know about their health and financial situation to have products they don’t want forced down their throat.

    In addition Mr Hoban is perfectly correct, the public should be provided with simple protection products, particularly with regard to critical illness. At the moment you get policy documents which read like a medical text book, there is a race between providers to out do everyone else with the number of illnesses they cover, and the public at large (and IFAs) don’t actually realise how rare these illnesses are and how pointless it is to cover them. Companies like PruProtect come up with ridiculously complex products to further confuse the market because it’s not possible to compare with traditional CIC. This is not helped by companies like defaqto who force insurance companies down this route to be competitive and this is lead by IFAs who can’t be bothered to compare quality but want the easiest comparison possible, and then barely understand the product themselves.

    What is wrong with a simple CI which goes back to the big 3 (stroke, cancer and MI) with a disability benefit attached? If anyone in the industry from IFAs to reassurers were truly customer focussed this is what they would be providing, and then we as an industry would be generically advertising protection to the public like crazy, because they really need this, they don’t need 154 conditions or IFAs squabbling over meaningless qualifications.

  15. To “Anonymous | 15 Dec 2010 9:47 am” you have some dangerously valid sounding points. If a client ends up paying massive IHT bills or doesn’t avoid probate, fails to nominate the right beneficiaries etc who should take responsibility then? You seem to be suffering the same ignorance as Mr Hoban and there are reasons for so much resentment and frustration from client focused advisors. I’m pretty mechanically minded but I still take my car to the garage to have its brakes worked on. I’m a pretty good cook but I still like to eat out on special occasions. It is pretty obvious you have a limited understanding of the value a good advisor actually brings as does Mr Hoban. I think you will find it’s the FSA who are squabbling about exams and the majority of the IFA community would be greatly more accepting of this if the banks had to ensure their sales staff had the same level of qualifications. Picasso’s work looks pretty simple to some people but to others who are able to look under the surface, true expertise is noted and appreciated. I do not know what you do for a living but if you have any confidence in your opinion perhaps put your name to it and live by reputations as IFA’s do.

  16. Yes anyone can buy a product from a website. You have a mortgage so you take a policy for £100K to cover that. You fall ill and you have no income protection or waiver of contribution so guess what the policy lapses because you failed to write it on the policy.

    You subsequently die and your wife can pay off the mortgage but guess what, she has no money to live on or even pay the funeral and costs of the wake.

    Yes you can do it all on a website if you have some degree of knowledge and the website asks the right questions. The fact is that if you go to an advisor well qualified in protection they will do it better and ask some searching questions on the way to ensure that you have the correct amount of life cover which is paid out to the right person at the right time.

    Having had a client with his wife and daughter killed in a car crash three days after signing up the policy with a quality company, I can tell you the difference an advisor makes.

    Mark Hoban has not go a clue on our industry and it is about time he spent a week in an office with an advisor who is based at the grass roots of advice.

  17. @Steven Balmer
    I accept that by remaining anonymous I have to accept your rude comments, but as I work in the industry I will remain anonymous because I am not going to risk my comments being taken as representative of the company I work for.
    I do not have a limited understanding of what a good adviser does but I have an excellent understanding of what bad ones do because I see the results. I also have an excellent knowledge of non disclosure rates on IFA protection products compared to direct to market products. This is no doubt what colours my opinion.

    As I said my company provides website based products through third party providers. We aren’t complete numpties regarding non-advised products you know. However yours and Bob Donaldson’s comments have given me some great ideas for improving part of the offering, so thanks for that 🙂

  18. @Anonymous | 16 Dec 2010 10:15 am

    “However yours and Bob Donaldson’s comments have given me some great ideas for improving part of the offering, so thanks for that :-)”

    Is this not a telling statement? Based on the simple comments of a couple of Advisers, you can now improve on your offering. What does that say about your previous offering?

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