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IMA: Ill-informed critics damage savings industry

Scaremongering and inaccurate criticism of financial services means savers risk losing out long-term.

You would be forgiven for feeling slightly depressed after a quick scan of newspaper headlines these days. We are all doomed – whether it be the state of our finances, the healthcare we receive or the standard of education in our schools.

And as for the financial services industry – why bother with them? The Labour party played a blinder this week when it used some questionable and misleading data to generate yet more negative headlines about pensions – including the now well-played out argument that hidden costs are draining money out of peoples’ pensions.

And hot on its heels came a report from the RSA, again using inaccurate data to fuel the flames further.

Well-informed debate is always welcome but scaremongering in this way is neither welcome nor helpful.

As we are on the verge of auto-enrolment, politicians and the industry should be encouraging people to save for retirement instead of undermining the good work which has gone into giving millions of low-paid workers the opportunity to save into a pension, many of whom will be doing so for the first time.

Given this backdrop, it is not surprising that many people feel less than warm towards the financial services industry. The investment world is not all bad. But the industry – including financial advisers – has an uphill battle to persuade people of this fact in the face of such hostility.

The fact is that there are transparent and well-regulated products out there and we should not forget them lest we forget the benefits they can bring.

Investment funds have helped tens of millions of people around the world to contribute to a better financial future for themselves. For people with modest amounts of money, funds are a simple way of gaining access to the capital markets, the benefits of professional fund management and diversification. And this comes at a relatively low cost compared with DIY investing.

With the best will in the world, we know that the new auto-enrolment scheme will only be able to offer people a basic foundation for their retirement savings. They will need to save over and above that if they are to have a comfortable retirement. And funds are one way of helping them to do just that.

The hope is that once people are auto-enrolled and start receiving statements about the pot they are building up, they will be encouraged to think about topping up their pension saving with other investments.

But first we must counter the myths and restore trust. Although the fund management industry firmly believes in its products and takes issue with claims about hidden costs, it is willing to step up to the plate and consider what it can do to help consumers.

That is why we recently published draft guidance to our members on better disclosure of all costs associated with investing. We hope that will help to allay some of the concerns.

And mindful of our responsibility to help people understand more about investing, we will shortly be launching a new consumer website.

The concepts of collective investment and saving for the long term are simple. They should not be mired in dispute.

Mona Patel is head of communications at the Investment Management Association

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. Total benefits paid out by life offices and private pension funds to UK policyholders exceed social security benefits – and not a penny charged to the public in tax. No wonder the closet socialists hide behind the consumerist badge and demand more regulation in spite of its abject failure to stop anything other than consumer thrift.

  2. Does that include the FSA?

  3. Kent time traveller 30th July 2012 at 5:52 pm

    Mona,
    Unfortunately, I am one of the masses that have been repeatedly ripped off by the so called financial services industry. Talk to me about insurance, banking, pensions, endowments, PPI, credit cards and I can tell you horror stories about real people that have lost real money and lots of it. Costs are obscene and contracts so one sided you will only attract customers with little or no real world experience.

    So do not be surprised if your industry has to go back to basics to ever try and restore trust – it will be several generations until it can be done properly and that is assuming there are some serious efforts from the industry to do it – which I do not currently see.

    So before you bemoan the lack of ‘financial literacy’ amongst the public, maybe you should realise that many are consciously deciding not to trust the big institutions with their money. It is nothing to do with not planning for the future it is to do with not wanting the industry involved in my future.

  4. What do mean, include?
    The FSA have been directly responsible for most of the problems.

  5. A positive attitude about what is right in financial services! An attack on scaremongering! Just how low can this woman fall?
    What am I to do with all the tools of self flagellation that I have bought? I’ve already booked in with a psychiatrist to repair the damage done. How can I bear the disgrace that the finance industry may have done some good over the years?
    Oh, the disgrace!!

  6. @kent time traveller – you have clearly come form the 1980/90’s or been deaing with just the banks for the last 20years.Yes there are some poor advisres as ther are poor Dr’s, solicitors, and MP’s car mechanics ,plumbers ,builders journalists and people who comment on here , but do not taint the whole industry with your general and very simplistic overview.I have seen a sea change in the industry in the last 30 years with over a £1 bn paid out in critical illness claims in the last 10 years, to people who would have had to rely on the state,without this rip off industry you so blithely talk about.You conveniently forget the millions saved in CGT/IHT and income tax by advisers for their clients and those who have benefitted from perfectly good pension schemes.Its the doom mongers like you that i despair of or are you just another ‘internet troll’?Please don’t respond your comments have no value in an RDR world (thats official from the FSA!)

  7. Michael Mason-Mahon 30th July 2012 at 10:36 pm

    My Shame of Mr Flint as Chairman and the Board of Directors.

    Courageous Integrity or just Cowardice?

    Michael Mason-Mahon Shareholder

    Mr Flint must go and go now.

    Mr Flint (Chairman), Mr Gulliver (CEO), Lord Green (ex-Chairman), Michael Geoghegan (ex-CEO), Rona Fairhead Board Director (CEO FT Group) and Mr Sam Laidlaw Board Director (CEO Centirca) and the rest of the Board of Directors of HSBC Holdings Plc.

    The Penalty should be a $ 4 Billion Fine and Suspend their Banking Licence for 1 year.

    Should criminal action be taken against the above people? Has Mr Flint and Mr Gulliver brought their office into disrepute?

    As Mr Flint was the Finance Director at the time and now as Chairman, should Mr Flint be held responsible for this criminal behaviour?

    What are our Board of Directors doing besides staying silent, is this their Courageous Integrity or is it Faint heartedness (Cowardice)?

    Will Mr Flint do the right (as per HSBC Values see page 9 Annual Report) and resign?

    Will Mr Flint restore some of the reputation of HSBC (he talks about so much) and resign today?

    At the age of 55 these people have made me ashamed not only to be British, ashamed to be a human being, by their actions and inactions. Please go to youtube: stop cheating bankers

    When myself and others complained to the FSA about Mr Flint providing false information to shareholder, not telling the truth about complains in India (Does this make the Chairman a liar?)

    Richard Hennity General Counsel HSBC Holdings Plc, reply to questions by MP Teresa Pearce, this part of his reply in question four.

    (We are not aware of any complaints being made about HSBC India to the FSA except by a shareholder activist called Michael Mason-Mahon.)

    Why would HSBC Holdings Plc allow/accept an activist to represent their own customers?

    Their customers want my help because they cannot trust this Organisation.

    It is my personal belief and experience that Mr Flint as Chairman has very serious problems with telling the truth, even when he should be telling the truth (what he can?) he will still not tell the truth.

    Flint saying “‘We cannot undo the mistakes” there not mistakes it is just plain illegal to launder money.

    Mr Flint you are the MISTAKE and a very bad MISTAKE at that, just ask customers in India about you.

    We are not ill-informed, you maybe by your article

  8. It’s always refreshing to have an incoherent rant from someone other than an IFA directed at somebody other than the FSA…

  9. Yes there are issues but that could be said of all ‘industries’. As Paul B outlines, there are good and bad in all walks of life. It’s up the client to establish who they want to work with…..

    If I deal with clients, I make it perfectly clear that what we charge for advice is independent from the solution (if any) we use. If products are involved, we clearly identify the cost of the ‘product’, the cost of the investment and the cost of advice. If they feel that’s expensive, then they can dispense with the advice or buy ‘cheaper’ funds.

    If people seek a solution and the cost of the solution is clear and reasonable then I don’t see the issue. Hence, I feel that RDR is solving many of these issues. Hopefully this will also help dispel any myths….

    Whilst not the specific drive of the article, I have felt for a long time that it is the general public who will find RDR harder to contend with than forward looking advisers as there is a client culture of ‘cheap is good’ and advice is free.

    We are therefore moving back to ‘initial charges’ etc which should see an end to people being locked into expensive contracts, but will also involve them needing to understand that no one works for free and that where advice is sought, there is a cost to those people who dispense with it – not just as a business, but also regulatory and risk based.

    Trust is a massive issue but I have spoken to many potential new clients who have been referred to us who put cost at the forefront of discussions. It therefore feels that trust is lower down a clients requirements that we might expect!

  10. Time Traveller:

    Your comments are ignorant and uneductated.

    I am very interested as to where your friends are saving for their retirement if not with financial institutions?

    Could it be that they are crossing their fingers and toes and hoping that ‘Santa the Benefits Fairy’ will look after them in their old age?

    The inductry has been damaged, and sadly many do have your attitude. Pension can be a fantastic thing, where else would you get an extra £20 invested for every £80 you put in as a basic tax payer? There is a massive choice of funds, including for those who don’t want any risk terrible rates of interest but my £80 under the bed would be £100 if I put it in a pension even if it did just grow by 1.5% per annum not meeting the cost of inflation that would be 1.5% more than in my piggy bank.

    Obviously there is massive value to advice in all areas of finances, but there will always be those ignorant people who think they know better because their mates in the pub have told them it is a waste of time.

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