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Traffic light system could help rate risk

Retail Financial Services Group chairman Richard Lambert has called for a traffic light system for financial products.

Former monetary policy committee member Lambert told the Building Societies’ Association annual conference in Manchester last week that pressure must be put on the FSA to introduce a simple consumer risk warning system in conjunction with industry to regain consumer trust.

Lambert, who steps down from his role as RFSG chairman in preparation for his new role as CBI director general in July, said the FSA would “run a mile” from such a suggestion but a traffic light system that clarified risk would be a welcome way forward.

The RFSG was set up last year to bring together industry and consumer interests and inc-ludes representatives from Aviva, Prudential, Sesame and Which? The aim of the group is to regain consumer trust and head off potential misselling problems, with much of its recent work focusing on equity release.

Lambert said the RFSG’s work had been justified by the evidence from FSA equity-release mystery shopping exercises which he described as “stunningly depressing”.

Former Financial Times editor Lambert also warned consumer groups that the inconsistency of their current work was hindering consumer confidence and they must be willing to put forward their own solutions and give examples of good practice the credit they deserve rather than simply bashing the industry.

Lambert said: “I do not think it is fair or reasonable to ask the FSA to assess all risk. A market solution for this challenge is a risk ratings and traffic light system. The FSA would run a mile but it would be in the client’s and consumer’s interests to come up with a clear expression of risk.”


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