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Misselling concerns holding up banks’ simple product plans

Banks still have to address misselling concerns before they are able to launch simple products, according to the British Bankers’ Association.

Speaking at a pfeg fringe event at the Conservative conference in Manchester today, BBA chief executive Anthony Browne, who sat on the steering committee of the Government-backed Sergeant Review into simple products, said banks are still working through the details but stressed the regime would not be a “safe harbour” from regulation.

The Treasury published its report into simple products, led by Carol Sergeant, in March with a list of kitemarked savings and insurance products. No bank or insurer has been able to bring out products based on the review in the seven months since the report.

Browne said: “Banks are working out the quality assurance scheme as we must have something which recognises them as simple products. 

“There are still issues around misselling because there are strict controls over how you actually sell products. While an individual product might be fine, we have to make sure it is not sold in way that could be misleading.

“Banks have a responsibility for the welfare of their customers. We have to conceive of the whole situation, so if customers have very big debts from payday lenders then it would be wrong to encourage them to put money into savings products as they should pay off their debts first.

”It is not a safe harbour from regulation or misselling. It should be simple because, as the parliamentary commission on banking standards said, financial products have become too complex.”

Click here for all the latest news from the Conservative party conference

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. This is becoming quite wearisome. If consumers want zero risk products and the right to compensation and redress when they discover something did not meet their expectations, then they have to pay an insurance premiums somewhere for that. Either they pay hefty IFA fees, or hefty product charges. To expect a bank to sell this stuff for next to nothing, yet accept liability later on if it fails to satisfy shows how little people understand the modern world.

    The consumer has become intolerant of risk and of failure, so the consumer must pay for that privilege. The product might be a SIMPLE one, but it will be an expensive one. No bank is going to take on consumer liability any more without having charged the consumer for it. The shareholdes are punch drunk from shelling out for compensation and can no longer underwrite this sort of liability. It’s why they have more or less stopped selling anything in banks.

    I can’t fathom why the halfwits at the FCA and all the various government bodies don’t quite understand this. It’s why IFAs have to charge what appears to be astronomical fee rates and why fund AMCs are going upwards not downwards. The FCA can froth at the mouth over fees and charges, but unless they do a volte face and force the consumer to accept their share of responsibility, then things are only going to go one way, and its not down the stairway to cheapness.

    The fact that the average punter isn’t prepared to pay the thick end of £200 per hour for their fully insured and protected advice proves though that the consumer neither values this protection/insurance nor is he prepared to pay in advance either. Not that it would deter the comsumer who chooses the DIY approach instead, and when it all goes pear shaped, will still try and find someone to take the blame. Increasingly, no one is going to be prepared to transact any business at all because they cannot expose shareholders to a liability for which they have not adequately charged for.

    You did that, FCA. And I hope you are proud of it.

    And any MPs reading this: take your heads out of the sand and realise that we need a radical rethink. If consumers demand nigh on infinite protection and compensation (more often than not from market risk gone wrong than any fraud or theft), then in the end there will be no product available for anyone. We will have to revert to an “insured sale” for which the punter elects to have protection, and an “uninsured sale” for those that don’t.

    That would be interesting anyway. It would be amazing to see how large the surcharge would be for the protection.

  2. The aim of the RDR was to get consumers engaging with financial services and to buy financial products. The barrier to entry was perceived as being too high for new entrants to the market place and the FSA wanted different ways for consumers to get advice rather than through financial advisers. This ranged from structured guidance through providing generic information to self select. MAS is perhaps one part of that strategy. For most advisers one aspect of RDR (and it is only one) was to improve the image of the profession and part of that was to raise the standards of qualifications and to clarify what charges consumers would be paying. The poor image had also been caused by badly designed products and the misselling of PPP, PPI and endowments so the fact that simple products are being delayed shows that the RDR has failed to address fundamental issues.

  3. I think the stance of the banks clearly shows where the mis-match is. It is not with complex products, 90% of products that 90% of the population need/want are relatively simple to start with. From life insurance to most retail investment options, they are not complex products.

    As Bryan Jones and the article above have aluded to the problem is with the process of providing the public with these products not the product themselves. The FCA’s stance has consistantly been to assume that the provider (bank, broker or IFA) is in the wrong from the outset of any complaint. This has led to providers taking more and more precautions against complaints. This is what is pushing the cost of advice up and has banks running scared of ‘simple’ products.

    The public also has a shocking tendancy to ‘forget’ exactly what was stated during an appointment. A hell of a lot of people will try their luck with a company because if they get a payout through bending the truth or outright lying then it’s a crime with no victim. Well there is a victim and it’s the public who doesn’t get access to the financial products they require because advisers at all levels can’t afford to take the risk of providing advice to anyone not willing to pay for it.

    Simplified products or it’s cousin simplified advice is not the answer to the advice gap that is being fostered by a combination of the FCA, FoS and CMC’s. The answer is to make it easier for all advisers to give advice, start all complaints from an equal footing and don’t apply retrospective regulations.

    All the above is just my humble opinion from the coal face.

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