A British task force is recommending that three simple, identifiable financial products be developed to get people to do a better job of managing their finances.
An independent steering group set up by the government in the United Kingdom published an interim report Thursday, setting out its initial recommendations on the development, and branding, of simple financial products that are intended to help consumers navigate the financial services market.
In the report, it proposes that three simple products — a basic savings account; a 30-day notice account; and a simple term life insurance product — be developed; that these products be marked by a common badge to make them easily identifiable to consumers; and that an accreditation body be created to screen products for qualification as “simple”. It also seeks comment on whether to include a simple income replacement product for loss of income due to sickness.
The report says that the availability of simple products will build consumer trust, enhance consumer confidence in their financial decisions, and ensure they have access to products that meet their needs.
“The issue we are seeking to address is that many people who could enjoy a better quality of life by making appropriate provision for their financial well-being are not doing so. They could be saving more, and protecting themselves and their families better against the uncertainties and challenges they may face, such as unexpected death or loss of income,” the report says.
Building awareness of the need for financial planning on its own isn’t enough, the report says, “it requires financial capability and self-confidence to turn awareness into action.”
“We have concluded that simple financial products should be designed to meet essential basic needs and no more, otherwise they will be too complicated. They should be easy to understand, easy to compare, easy to buy, easy to maintain and monitor as well as providing consumers with a fair deal. There should be no risk of surprises for the customer,” it says, adding that these are products designed to be sold without advice. “This will mean buying the products will be affordable for consumers and marketing them will be commercially viable for providers.”
Each simple product will have the same basic terms and conditions and they will be described in exactly the same, straightforward language. Providers will compete on price, service, and the value associated with their own brand, the report recommends. And, they will be clearly labeled with a badge, so that consumers know that a product meets the simple product standards.
“When consumers arrive at the financial marketplace there should be simple processes and products available to allow them to make an informed and straightforward decision,” said the chair of the steering group, Carol Sergeant, former chief risk officer at Lloyds Banking Group.
“The government is committed to putting the consumer back at the heart of the financial system, but we understand that restoring public trust in financial products is not an easy task at the moment. I am pleased to say that ‘simple’ financial products offer a unique opportunity to demonstrate that products can both be easy to understand and meet customers’ most important financial needs,” said the financial secretary to the Treasury, Mark Hoban.
The report is out for comment until October 12, and a final report is due in February.