Sir Callum McCarthy’s challenge to the long-term savings industry to come up with an alternative business model to meet the needs of consumers, advisers and providers comes at an opportune time and the industry must respond positively.His assessment of the issues affecting the industry make grim reading for most people involved in the long-term savings sector. No one would dispute that reform is required. His words resonate with those of us who are already considering what can be done to improve the way the industry works. We must not underplay the positive aspects of the industry. Current business models deliver excellent outcomes for many people. Those who seek professional advice from efficient advisers and make well judged longterm investments for their future are well served. But there is considerable scope to improve things. I hope Sir Callum’s remarks will galvanise all sides to think more creatively. If we get it right, we can make a real difference to people’s lives, including their prosperity in retirement. Sir Callum suggests that the solution may lie in finding a new supply chain model. I agree. Thinking differently about distribution and advice is essential to meeting the changing needs of customers and bolstering our industry’s reputation. But lasting progress will only be achieved by making changes to the demand side as well as the supply side of the equation, creating a virtuous circle where demand and supply interact effectively. We believe that not one but probably several new models are required to enable the industry to reach different segments of the market. On the demand side, it is financial capability that requires more attention. There can be few other markets where there is such an imbalance between the consumer and manufacturer in terms of knowledge and understanding of needs and what solutions can meet these needs. The FSA has committed 20m to this but more effort is required from providers as well as the Government. It is not just how much is spent but how we spend it and how we champion the concept. Better informed and more engaged consumers lead to greater demand for long-term savings products, which should lead to greater competition, driving down costs and making advisers and providers become more focused on customers. It is hard to avoid Sir Callum’s conclusion that change is needed. It is not true to say that fixing the business model alone will solve the problem but we do need new models – improved models to serve our existing market better and complementary models for people who want to be our customers but are not. Momentum has been building in recent months with the concept of generic advice as an entry point for people to address their financial circumstances in the broadest sense – a service which would educate people and pinpoint their needs. This has the benefit of addressing low financial capability and encouraging new customers into the market in the short to medium term. Beyond generic advice, we must look to promote consumer confidence in the industry through greater transparency and understanding of what people are buying and what the charges represent. We must design products for customer needs to reflect their lifestyles. The concept that advice has a value and should be paid for, whether through commission or fees, needs to be more widely accepted. We need a range of models to reach the various segments of the market. We need to improve the robustness of the independent financial advice sector by encouraging IFAs to build strong businesses, looking to attract new customers as well as tending to existing clients. At the same time, Sir Callum needs to accept that while the IFA model works best for many people, offering quality opinion, information, encouragement, bespoke solutions and a variety of ways to pay, others may need different solutions. We must look at where there is scope to make things simpler, more transparent and just plain easier for people to save. We must look at remuneration, charges, capital risk and return. Sir Callum should be prepared to put the regulatory model on the table at the same time, so we can look for regimes which reward well run businesses and new models which safeguard customers. The long-term savings market is reaching a critical stage in its development and it is time for the industry to take the initiative in shaping the next stage in our evolution.