Fishburn Hedges

20.10.2011

The relationship between consumers and financial institutions is a difficult one. The democratisation of financial services has moved the UK from a place where a small proportion had bank accounts, even fewer had mortgages and pensions were something your employers provided, to a nation where not having a current account is a minority activity, where we have more personal debt than almost anywhere in the universe and a large proportion of us have personal pensions, and millions don’t have a Scooby about whether they are good value or not.

This has come into focus with two interesting developments. First, the National Association of Pension Funds has bravely bitten the hand that feeds it by criticising the charging structures of many personal pension plans. They are overly complex and too high, says the NAPF. The latter is almost certainly a function of the former, and I will (not very) cheerfully admit that despite 20 years as a financial journalist, I do not understand the complexities of possibly the second most important financial investment in my life (after my home). Well done the NAPF for speaking out.

Secondly Adam Phillips, the head of the Financial Services Authority’s consumer panel, has raised the question of whether the FSA’s requirement for financial firms to “treat customers fairly” is delivering for consumers. I’m not going to get into this debate – although I largely agree. But I will point out that from a communications point of view, “treating customers fairly” doesn’t give a good message. To show it up through looking at the negative, does the FSA presume all financial institutions “treat customers unfairly” unless they sign up to the FSA’s principles? Or to put it more starkly, are all financial services companies guilty until proven innocent?

It is a classic case of “give a dog a bad name”. If we want confidence in saving for the future, financial institutions need to trust their customers by being transparent, and the regulators need to change their language to imbue a feeling of trust in the system.

Posted by Jason Nisse