The public’s perception of a financial services industry that has lost its way, detached from the interests of its ultimate owners – savers and pensioners – is clearly going to take some considerable time and effort on the part of the City to alter for the better.
But an ambitious project which aims to bring together all the various financial service sectors, trade bodies and consumer groups to develop a “manifesto” for saving and investing, encouraging Britons to plan for longer lives and retirement, might just help the City to start sneaking its head out of the doghouse.
The industry-wide initiative is being led by TISA, which represents 145 firms involved in the supply and distribution of savings and investment products and services. Its bold aim is to create proposals for “a new savings and investments policy”; exert greater influence over the direction and future of financial services; and rebuild consumer confidence and trust.
The project’s findings, conclusions and recommendations will be used “to work with government, key political parties and regulators to present a consistent industry view”.
An executive committee has already been set up comprising 20 leading financial services. The list includes buildings societies, asset managers, distributors, wealth managers, platforms and providers. Aviva, BNY Mellon, Barclays, BlackRock, Nationwide, Charles Stanley and Zurich are among those onboard.
It would be fair to say its launch last month attracted little attention. Certainly there will be many viewing the whole exercise as perhaps a PR exercise by the City, expecting it to be little more than a talking shop that will fizzle out, if not through lack of seriousness and determination on the part of the players, then through the sheer inability of such a diverse group, many competing against each in the market, to agree to a single viewpoint.
Tony Stenning, head of UK retail at BlackRock and the chair of the project’s executive committee, is very alive to these concerns but insists the initiative has firm foundations, a sound rationale and members who are determined to deliver: “Why are we doing this? Well, it’s clear government and employers, for varying reasons, are actively shifting financial responsibility onto the individual. That is going to require increasing action from consumers and we as an industry need to help them through that transition.”
With BlackRock research showing Britons are holding more than two thirds of savings and investments in cash, and a recent AXA study revealing more than 60% do not expect the state to provide the majority of their retirement income, the challenge for Stenning is clear: “People want more transparency, they want a simplified regime, they want greater understanding of investment products. They need to feel much more confident and knowledgeable about financial services. Our research has shown conclusively that financial advice and education can provide tangible benefits. ”
Stenning (right) believes there is a combination of reasons as to why the public’s trust and confidence is lacking. Clearly the behaviour of parts of the financial services sector, the short termism and the get-rich-quick mentality that culminated in the great crisis is major bugbear. But well-intentioned regulation that has led to unfortunate, unintended consequences has not helped either.
Another major reason for the savings and investment impasse, and one which the project aims to tackle head on, is the diverse range of positions adopted by players across the industry: “In the past if you had asked the various parts of the financial services industry about savings, pensions, investment challenges for consumers, you would get a very wide range of views on how to address them. And that hasn’t helped if you are a policymaker in government; it certainly hasn’t helped if you are a regulator trying to regulate that savings and investment policy; and it absolutely has not helped the consumer.
“If you marry all those problems up, what you are left with is the encouraging of a debt culture rather than one based upon savings. The big question for us on this TISA project is: can we create some sort of environment, a savings and investment agenda, that can help generate the necessary impetus for investing for the long term and not the short term?”
“What we are trying to achieve is a single view from the financial services industry to influence cross-party thinking – it can’t just be government – and regulators. We also want to work closely with media to get our message across that, at its core, the project is about addressing ‘whole of life’ issues for the consumer.”
Delivering the goods
Stenning reveals that in addition to the founding 20 companies, the project membership is well on the way to expanding by another 30 organisations, trade bodies and consumer groups. “The 20 we started off with is certainly a broad church but it's still not the entire industry.” The additional participants will work with the executive body via an advisory committee.
Pan-industry ambitions aside, the project will ultimately be judged on what it produces and how much influence it has. The first task is to develop strategic savings proposals by next September, in good time for all the parties to consider them as they draw up manifestos for the 2015 General Election.
“For the first time in a very, very long time we know when the next election is going to be,” says Stenning. “We want to develop proposals that the industry as a whole can sign up to, and then say to the parties here is what we think can work. Hopefully they can consider them for their manifestos and regulators can include them in their thinking.”
Stage two of the project is to develop ideas for the investment engines to drive those savings and investment proposals into the real world. “That will probably take us another year, and that is where we feel we can help the next government, no matter what shade it is, to deliver on the stage one proposals.”
He admits the development of those engines will be a “big challenge” and at this, still early stage of the initiative, is reluctant to consider the actual shape of products, solutions, that might emerge: “We can’t put the cart before the horse but clearly the project will need to get into product engines, look to deliver tangible long term solutions. First we all have to agree what the problems and potential solutions are.”
A major objective of the project is to “depoliticise” savings and investment policy and agendas: “Governments are elected for a four or five year term, and often hemmed in by requirements at the start, which can force them into decisions they might not want to undertake. Tinkering, making changes to savings environment and policy, specifically, creates uncertainty for consumers, which breeds fear, which means people stop looking to the long-term.
“If we can identify policies, agendas that can be depoliticised, lifted out of that four or five year political cycle, then hopefully you can look to create a much more stable regime for long term financial stability. It’s not a criticism of politicians – at the end of day they are at the mercy of the mandate of parliament “
So far the reaction from politicians sounded out about the TISA initiative has been “very encouraging”, says Stenning, adding that the FCA is also informed about the project.
He is all too aware of the gigantic challenge the project presents: “Believe me, I am not going into this with anything but my eyes open,” he says chuckling. “But there is a huge and growing groundswell of support for it. Rightly, because of various actions by parts of our industry, we are not held in the greatest of lights. Here is a way we can reconnect with the consumer.
“This project is about clients, competitors and organisations coming together, agreeing to put their own interests to one side, focus on the consumer, show people we are here to aid and grow their assets.
“I would argue that this initiative is self-regulation at its very, very best…we are standing shoulder to shoulder with the regulator, to get the best outcome possible for the consumer. I am very passionate about this and delighted TISA has given us this forum to galvanise the industry in this way. And hats off to my colleagues, competitors in the industry too for saying: “let’s do this”.”