For decades Britons were far more likely to get divorced than change banks but this is no longer true. How this change has been achieved provides an important lesson for the long-term savings industry and presents a clear case for action by life companies and platforms.
Not only is it now possible for people to switch bank accounts in just seven days, with the banks taking responsibility for making sure the move works, but services are emerging that make it easy for people to obtain a personalised comparison of which bank will offer them the best deal.
The first of these comparison tools has been built by Runpath Digital for Gocompare.com. Many people in the adviser market will know Runpath director Paul Holland, who founded the Webline service that is now a core part of Capita’s protection comparison proposition. He is one of the best people I know in our industry when it comes to actually making change happen.
The service allows users to upload a data file, which all consumers can now obtain from their own banks. It has a valuable by-product in that the Government’s midata initiative could make it easier for consumers to populate their information to the increasing numbers of personal financial management tools becoming more popular. I am picking up conflicting views on whether this undermines or enhances the position of those organisations that have previously aggregated such data. This is a subject in its own right and certainly something anyone operating or planning a PFM service should make sure they understand.
The midata initiative was catalysed by the powers contained within sections 89 to 91 of the Enterprise and Regulatory Reform Act 2013, which enabled the government to compel organisations in certain industries to supply information to consumers in a digitally readable format. Faced with a legislative obligation the major banks all decided to embrace a voluntary code to make this happen.
The Government only needs introduce secondary legislation to extend these E&RRA powers to other industries and it is not difficult to see the attraction of doing so in order to facilitate better delivery of information to savers about their pensions and other investments. This could be helpful to the Department for Work and Pensions’ efforts to facilitate wider pension portability.
Notably the act allows for the provision of customer data “to a person who is authorised by a customer to receive the data, at the customer’s request or, if the regulations so provide, at the authorised person’s request”. Such steps could be a very effective way to end the shameful behaviour of some closed book life offices and other organisations who seem to have made it as difficult as possible for consumers and advisers to access details of their policies as part of an asset retention strategy.
The services being built for the banking industry seem heavily focused on price as a key metric. For long-terms savings it should be important to make sure there are ways of recognising wider value. It must also be important to ensure any such standard requires insurers to provide full information on any additional areas such as guaranteed annuity rates, guaranteed minimum pension and so on.
In its recent final report on its retirement income market study the FCA explored the creation of a central pension portal service through which savers could access details of their pensions online.
Clearly there would be huge benefits in the development of similar services to help consumers better understand the value of their savings and investments. However, I cannot help thinking that following the approach taken in the midata initiative – i.e. encouraging competing industry solutions – will better serve consumers than a single service operated by the regulator or some other government body or appointee.
Given the FCA interest in this area it appears inevitable that, if the industry does not step forward with a way to address this, sooner or later one will be imposed on us from somewhere within government or regulation. To me, this presents a clear case for the industry to come up with a solution to how to get consumers the information they need to make better decisions digitally, as a matter of urgency, before it is taken out of our hands.
Ian McKenna is director of Finance & Technology Research Centre