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The research Consumer Focus should pay attention to

Last month’ s flawed research from Consumer Focus into pension switching has, quite rightly, been widely ridiculed for the lack of evidence on which it based its sensationalist conclusions. It is the first time I can remember every Money Marketing columnist actually agreeing on something.

The Government-backed body suggested IFAs were responsible for an unacceptable level of pension churning into high charging funds, a problem it says will continue after the RDR. It based its grand conclusions on just 31 pieces of business emanating from two networks over a ten year period.

Inexplicably, the report’s finding were widely picked up by the national media, leading to the inevitable scaremongering headlines about advisers and more generally about pensions.

However, before congratulating themselves too much on managing to convince so many journalists to swallow a report so lacking in credible evidence, Consumer Focus might want to ponder some other research featured in Money Marketing this week.

A British Population Survey into the reasons why people are not contributing into a pension, conducted in December, makes for interesting reading. Just over 50 per cent of those without a pension say it is because they cannot afford one. However, nearly 7 per cent put their failure to save in a pension down to bad publicity, higher than the 4 per cent put off by high charges.

Consumer Focus needs to realise that the publicity generated by reports such as the one it published last month have consequences, the most concerning being that people are turned off the idea of saving altogether.

If the research uncovers unscrupulous behaviour or shines a light on an area of the market where standards need to be improved then it is, of course, to be welcomed.

However, if the research encourages sensationalist headlines which cannot be backed up by the evidence produced, then it has the potential to do a huge amount of damage.

Government agencies, regulators, private companies and PR agencies are all well trained in packaging up that killer statistic or message they believe will sell their “story”, and therefore their brand, to the journalist and on it their readers.

The easiest way to do this is through research. Unfortunately the fact that the research may be based on a tiny sample, conducted by asking biased questions or flawed in its calculations, as is sometimes the case, is often ignored in the quest for that easy headline.

The Consumer Focus report is by no means an isolated incident. For instance take FSA chief executive Hector Sants’ back-of-a-fag-packet calculations to work out that £600m of consumer detriment is taking place each year or FSA head of investment policy Peter Smith’s gross manipulation of FOS statistics to try and underplay gulf in standards between IFAs and bank advisers.

This research from the British Population Survey should serve as a timely reminder to organisations who wield considerable influence in the public sphere that this influence comes with responsibility. And that in striving to achieve the headlines you crave at all costs, you risk hurting the people you claim to be looking to serve. 

Paul McMillan is the editor of Money Marketing- follow him on twitter here

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. But will Consumer Focus publish a retraction. Will they highlight the real benefits of financial advice, retirement planning, the need for the general public to understand the concept of actually having to pay for the advice they recieve?

    I won’t hold my breath!

  2. Will the BBC also run a retraction as they ran this story on the morning BBC news.

  3. I am in the process of crowd sourcing a peer review on the OFT Report setting out the rationale behind the concept of ‘consumer detriment’. Something which the OFT / Failed FSA failed to do. As you would expect it is proving that the whole idea of ‘consumer detriment’ is utterly flawed and nonsensical (as is nearly all of the Failed FSA’s reg-yew-lay-shun). Once the weasel words of ‘consumer detriment’ are exposed for the fraud they are the whole excuse for the RDR falls away. And with it the reputation of Sants and co.

  4. The findings seem as misrepresentative as the words yesterday on BBC breakfast of David Willets and the detriment of students who will have to pay their student loans, which will be much higher, over a much longer term and cost them thousands more.

    It would seem that because the monthly payments of those who start university in 2012 will be lower than those who start in 2011 the overall cost is of irrelevance – I seem to remember that this was an issue with the sale of endowments, monthly payments cheaper didn’t mean cheaper!!!

    Also apparently because it will not show up on a credit check it won’t affect a mortgage application – is this not encouraging non-disclosure Mr Willets and potentially mortgage fraud – great advert. Is this a move that you recommend to your civil servants when making their mortgage applications too?

    Based upon such comments I genuinely think that the Government don’t want people to understand finance and to continue to be scared of money, they would ask too awkward questions.

    And I won’t even start on my views of the ethical abilities of the media to present the factual story without huge amounts of spin, whether hacked or not – Never in a month of Sundays in a term which springs to mind.

  5. Spot on ! the fact is that most of the quangos (including the FSA itself) and the media have their own agendas – not least of which is self-justification and self-enrichment.

    Even now, the general public has access to decent advice via IFAs at realistic rates (be it commission or fees). Most of the really poor advice (unless someone is stupid enough to go to the bank for advice) and garbage products have gone – regulation has helped a little but competition has helped more.

    From here on, the cost of regulation cannot be justified and, indeed, RDR is an example of the regulator forcing through ill-thought-out legislation which will do more harm than good (I agree with improving qualifications standards but disagree with just about everything else).

    From here it will be all ‘down hill’ – less access to independent advice for the masses, higher costs for those that can afford independent advice (VAT and more regulatory costs to cover), ordinary people being forced back to the banks for ‘advice’, and a regulatory bandwagon that will roll on and on and on (eventually with all of us being completely ruled by diktats from Brussels).

  6. This is a excellent extension to the Consumer Focus article.
    The FT gave prominent coverage of the Consumer Focus on the front page of their Weekend Money Magazine. There must have been quite a response because they provided a follow up the following week, buried in the middle pages of the Money Magazine, and with no real explanation of why they were adding to the story.
    Matthew Vincent did have the courtesy to respond directly to my complaints (though he didn’t respond to the 8 pages of factual rebuttal of the Consumer Focus analysis), but for most people the only impression would have been the initial, front page comment – pensions are a scam. I am surprised that bad publicity puts off only 7% – though perhaps they were being polite.
    Interestingly I noticed no coverage of this latest Survey in the FT, which obviously does not fit in with the section in the editorial handbook – salacious headlines only.
    I have been screaming for some time now that the FSA and the media are a self defeating entity. By only denigrating what happens in Financial Services it is inevitable that consumers will assume that poor advice is the norm. By any reading of the published statistics it is clear that over 99% of all transaction are completed without complaint. I can understand why the Media are self serving, but it makes no sense for the FSA to go down the same line, other than self obsession.
    But it is also true that the Financial Services industry lie down and accept the bad publicity, presumably on the assumption that it will go away. It won’t. It makes good headlines, even (especially) when they are false.
    Most IFAs are not in the position to spend long periods of time doing the hard research to rebut these fallacious reports. But one would think that AIFA and the insurance companies would have the resources. So why is so little (actually nothing) coming out of these organisations.
    It is somewhat embarrassing to realise that Paul McMillan appears to be the only person in the UK willing and able to put forward an alternative view in the media. The disappointment is that it is in the industry press and therefore not readily seen by the majority of the UK.
    I would be interested to know precisely what it is that Steven Farrall is doing. There seems to be far too little factual rebuttal of the institutional smears, so this would appear to be a step in the right direction.

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