Sergeant review of simple financial products

1. Background
2. Research question and aims
3. Methods
4. Findings
5. Recommendations
6. Points to consider

Background

In 2011, following earlier Government consultations on simple financial products, the then Financial Secretary to the Treasury asked the author to chair an independent Steering Group to develop a set of Simple Financial Products that would be easy to understand and would enable consumers to plan and manage their every-day finances. This report sets out the final recommendations of the Steering Group.

Research question and aims

The focus of the Steering Group, in response to an earlier Government consultation, was on simple savings and insurance protection products. The goal was that these should:

• Help consumers compare with other products
• Be easy to understand and widely accessible
• Instill confidence in consumers that the product would meet their basic needs, and be fair
• Be a viable proposition for financial services providers

Methods

The review brings together:

• The Interim Report (published in July 2012), which was prepared to support the consultation process
• Responses to the consultation
• Desk-based consumer research and behavioural economics workshops
• Primary consumer qualitative research.

The Steering Group consulted with representatives of a wide range of organisations including consumer bodies, the financial services industry, charities, data and research bodies and consultancies. Senior representatives of the Financial Services Authority and the Treasury also made contributions to the consultation process.

The primary consumer research comprised six ninety minute focus groups on savings products and ten hour-long in-depth interviews on insurance and protection.

Findings

A number of issues with existing products were identified:

• There a so many products to choose from that even where simple products do exist, consumers can’t identify them.
• The language used in many financial products is confusing and can be inconsistent.
• Some products attempt to cater for every situation and, as such, become much too complicated.

Overall, the author found that simple products should be easy to understand, buy, manage and compare, they should be fair, and they should be offered on a non-advice basis; that is they can be bought without needing specialist personalized advice.

Recommendations

The author made seven recommendations, and gave a detailed rationale for each. In summary:

1. Straightforward language should be developed.
2. Simple Financial Products must comply with a set of principles, also set out in the review.
3. The first set of Simple Financial Products will be Easy Access savings account; 30 day notice savings account; Regular Savings Account; and Fixed Term Life Insurance.
4. A whole of life insurance product should be included in a later phase of Simple Financial Product development.
5. The Credit Union movement will be invited to develop Credit Union specific products.
6. A Simple Financial Product badge should be created and awarded to products that meet the standards.
7. The British Standards Institution (BSI) should take on responsibility for the Simple Financial Product principles, standards and accreditation.

Points to consider

• Relevance: The review is highly relevant as part of a wider effort to improve financial capability and inclusion.
• Applicability: This research is applicable to financial service providers and anyone with an interest in financial inclusion and financial capability.
• Methodological strengths or limitations: The details of the consultation and the participants are not given, but given the provenance of the review, it is likely that the Steering Group participants were senior individuals, with considerable expertise, in relevant organisations.

Full report

Sergeant review of simple financial products - full report