A review of Britain’s multi million pound investment and savings industry has suggested that an assortment of uncomplicated investment products should be designed in order to assist low income earners develop a savings lifestyle. According to the Sandler Review, the introduction of more uncomplicated products as well as advice would be the solution for increasing competition and to empower the consumer.
The way financial advice is given also needs to be revised and the financial advisors themselves should only be permitted to work on a fee only basis. Those advisors not working for a product supplier should be allowed to call themselves independent brokers or advisors. The review has also proposed that a simple range of community type products be introduced and all charges on the product should be limited.
Straight forward investment policies must be available to all consumers and any advice regarding the policy should be available from a general advisor and not a professional. A clear and simple path, with profit type policies which counteract the volatile stock market, must be supplied. Financial advisors will also need to upgrade or improve their investment qualifications.
Lastly, the review has suggested a more simple tax application as regards pensions and savings and an easier way of increasing the financial knowledge of the consumer. An understanding of basic financial matters should be available to all and the consumer is well advised to take advantage of any advice on offer.
The review was initiated by the Government late last year and was headed up by former Chief Executive of Lloyds of London, Ron Sandler. He has said that the proposals emanating from the review presented enormous challenges to the savings and investment industry. He added there are two main problems facing the savings industry.
On the one hand savings levels are not sufficient, especially among the poorer wage earner and the cost of servicing this segment is fairly high. The other problem facing the market is although competition is healthy, it is not effective enough to deliver value for money or cost efficiency.
There is a huge range of products available and this has caused the industry to become extremely complex with the different products becoming difficult to compare. This degree of complexity was preventing low wage earners from saving because of the high consultant advisors cost.
No initial take-on charge should be applied and any annual charge needs to be pegged at around 1% although this would be reviewed on a regular basis. The investor does not want to see his interest earned get eaten away by excessive charges. Any condition attached to the investment must be explained in plain English.
Investors should be allowed to withdraw their investment policy funds before maturity without having to pay an excessive penalty charge nor should they be penalised by having the policy value reduced.
Ruth Kelly, Financial Secretary to the Treasury, in welcoming the review, has said it sets a standard for a more transparent, simple and competitive investment and savings industry.