Sam Dunn: In 2005, financial advice is stuck in the dark ages

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The Independent Online

One month ago, a letter was sent to the head office of every mortgage lender in the UK.

The sender was no less than the City regulator, the Financial Services Authority. Its message? Put the kibosh on your confusing explanations of home loan charges.

The watchdog had found that "key-facts" documents shown to consumers - which have been compulsory since last October - were littered with errors and composed in "overly legalistic language".

Its letter to the mortgage companies came with a threat: fail to sort the mess out and we'll come down hard to make sure you do.

At the beginning of this month, key-facts documents also became compulsory in the world of financial advisers, as part of a drive to help customers understand the charges attached to advice and products.

Now I'll wager that, at some point in the coming weeks, an FSA official will dredge up the letter sent to the mortgage companies, change "Dear mortgage lender" to "Dear financial adviser", and fire off the warning once again.

What is it with the concept of making things simple for customers? It's hardly rocket science. The Financial Services Consumer Panel, a wing of the regulator that aims to push consumer interests, releases its annual report tomorrow. It includes the following complaint: "It really is high time that the industry grasped the simple concept of providing clear information to help consumers make effective decisions.

"The industry cannot expect consumers to take more responsibility for their buying decisions as long as some of its number continue to behave in this unhelpful manner."

That's putting it mildly.

It's not as if companies have nothing to play for. Mis-selling scandals that stretch from recent high-income "precipice" bonds and endowment policies back to personal pensions in the late 1980s and early 1990s have destroyed many consumers' faith in financial products - and worse, the companies that sell them. Winning back trust is vital for the industry's long-term future; after all, no punters equals no profits.

A large dose of clarity is surely the best way to do so. Ideally, it should be all about customer service. Consumers need a lucid explanation of how a product works, no matter how complicated it is, so that they can feel comfortable with the financial decision they are making. The FSA has itself set up an initiative to promote better service, called Treating Customers Fairly (TCF). If the consequences weren't so serious for consumers, I'd have to laugh wryly at this: one of the world's most sophisticated financial services industries needing its regulator to remind it to make sure those who trust it with their money are getting a good deal.

Customer service - ie, putting the customer first - is supposed to be paramount in Britain today, yet in this industry it's far too often lacking.

The problem with making things simple is that it gives the consumer too much power - enough to think twice and pursue a better deal that might lie elsewhere.

I've no doubt that the financial services industry understands this perfectly. It would prefer that customers trust their advisers and salesmen, and the product being sold, rather than having to go to the trouble of explaining all the upfront and hidden charges involved.

Whatever is at the root of obfuscation - be it ignorance, incompetence, cumbersome tradition or deliberate profiteering - it's served the industry too well for too long.

So, let's hope those letters from the FSA don't fall on stony ground, and we can at last see an end to customer disservice.

s.dunn@independent.co.uk

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