“One thing is clear: industry will not solve these issues without intervention, whether it is a regulatory ‘RU64’ type approach, or a statutory duty of care to force firms to ensure their customers really understand what they are buying and what it will cost them.”
Patrick Connolly, certified financial planner at Chase de Vere and winner of Unbiased’s Financial Adviser of the Year title, said in theory having very simple financial products should make people more engaged and more confident in terms of understanding their finances.
However, he said this approach has been tried before with CAT (cost, access, terms) standard products and also with stakeholder pensions, which are simple but not flexible, and neither of these proved particularly successful.
Mr Connolly said: “People want more choice and more flexibility, but with that comes more complexity and a greater likelihood that they will make the wrong decisions.
“This opens up the need for advice, because the decisions people are taking are often too important to get wrong. This should be independent financial advice and could be facilitated through employers, which can make it accessible to more people.
“Unfortunately, we currently have a system with complicated products and ever-changing rules and regulations, where too many people are encouraged to make their own financial decisions. This sounds like a recipe for potential disaster.”
emma.hughes@ft.com
