The savings and investment industry is a vital one as no government will be able to plug the savings gap crisis or the alarming increase in pension poverty – in Britain, it’s simply not a good place to grow old.
Readers may well know the statistics – we have 1.8 million pensioners living in poverty (1 in 6) and this number is set to increase substantially as we all live longer – with 17% of today’s DWP budget going on the elderly and this set to increase substantially in the future.
But this vital industry is not conducting itself in the best interest of its consumers. Instead it is a bloated cartel that is conflicted at every turn. Its websites and literature are littered with the words integrity, trust, added value, and putting customers first – but it operates on caveat emptor and has forgotten the human face of what it does, as well as its wider corporate social responsibility.
These platitudes conceal the fact that the very people who are being responsible and prudent are being ripped off and abused by layer upon layer of hidden fees, misleading advertising touting returns that over 90% of managers simply cannot achieve, being sold high cost poor performing products that are not fit for purpose, and not being granted the right to know exactly where their money is being invested.
In 2000 the Financial Services Authority’s (FSA) own report found that 50% of costs were hidden. Here we are 14 years later and nothing has changed; savers and investors are still do not know exactly how much they are paying. The very people who are being prudent are being abused, and the revelations around misconduct, cultures of greed and a disregard for consumers since the crash of 2008 continue to fuel public mistrust. The only answer is transparency regulation that will serve to disinfect this industry and cast a light in the dark corners where dubious anti-consumer practises continue to fester.
Change is coming via a number of EU directives in 2017 but a Labour Government should be at the forefront of defending savers and investors by bringing in legislation that addresses the existing abhorrent lack of transparency. Only then will this industry begin to extinguish the epidemic of self-service and begin to create a level playing field where new, efficient, ethically minded companies can enter and true competition and choice be offered to consumers.
Ed Milliband rightly criticises rip-off banks, and the work being done on pensions, although this doesn’t directly address the investment industry, even though it is the investment return engine that will drive peoples’ long term financial self-sufficiency and financial health. Self regulation has not worked and financial services continue to be detached from any tangible sense of understanding of its wider public responsibilities. We simply cannot allow being an OAP in Britain to become synonymous with being “old and poor”.
It is in the area of promoting greater transparency in financial services that the True and Fair Campaign, which I co-founded in 2012, aims to make the most difference. Not only have we conducted detailed consumer research that has found that 89% of investors want to see a true Total Cost of Investing / Saving in one understandable number; and in pounds and pence as well as in percentage terms; 64% would actually save, or save more, if they trusted the industry.
There is no other industry or sector where such “cloak and dagger” practises would be allowed, yet the financial services sector continues as nothing short of a British farce.
Our True and Fair Campaign, and the True and Fair Calculator we have built and financed that gives users a Total Cost of Investing number has been met with anger, derision and intellectually and morally bankrupt excuses from the industry and it’s associations, even though I believe the promotion of transparency, clarity, accountability and understandability will undoubtedly make the savings and investment management industry more competitive.
Recent estimates show how 49 per cent of the UK workforce is not saving enough for retirement. Despite current Government initiatives to change this, such as the introduction of auto-enrolment, the level of savings in the country today is unlikely to improve as much as it needs to, so long as consumers are not able to understand or compare the costs of using the various outlets for their savings.
Our consumer research has found that the reforms True and Fair has been calling for, and a mechanism such as the True and a Fair Calculator that gives users a Total Cost of Investing number, would significantly restore trust in the financial services industry. But despite the reputational benefits, the industry and its associations continue to stonewall, develop half-baked solutions that are not fit for purpose, and defend the indefensible. Behind their new superficial consumer friendly rhetoric, they continue to bury their heads in the sand and defy common sense and decency.
As a result, the time has come for politicians to seize this agenda and clasp the mantle of reform. This industry is broken. There is a severe level of public mistrust and a consumer hunger for radical reform. The next Labour government will have an opportunity to transform finance, put the consumer at the heart of the system and recast one of UK Plc’s most significant and fundamental industries on the foundations of transparency, trust and long-term stable outcomes for consumers and communities.
Ed Miliband has frequently spoken about the need to promote competition in financial services, and ensuring that the industry works for the many and not just the few, but this must not be just about reforming high street banking. This should include our True and Fair mission to create a truly competitive and transparent investment and pensions sector, providing a clear and coherent prospectus for long overdue reform which we feel should form a key part of the next Labour Government’s agenda for change in financial services, and be a landmark win for Labour in 2015.
Every year since it started, we are at the bottom of the European Consumer Market Scoreboard and there we remain. But Britain’s financial services sector should be setting the gold standard globally. Instead it is shrouded in secrecy and failing to provide the British saving public with outcomes that will prevent them from being a burden on the state.
Gina Miller is Founder of the True and Fair Campaign