'The introduction of "Simple Financial Products" scares the...' blog discussion

Former_MSE_Helen
Former_MSE_Helen Posts: 2,382 Forumite
This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.




Please click 'post reply' to discuss below.

Comments

  • squeeks
    squeeks Posts: 309 Forumite
    edited 28 March 2013 at 3:23PM
    There is a balance to be struck. Over complicated products are a pain, it makes product comparison harder and there will also be someone who thinks they are getting one thing, but didn't read the small print (and sometimes the big print!).
    Over simplify products and you may remove some opportunities for individuals who are more aware of the product on offer and their own financial circumstances.

    Overal I am on the side of simplification. While finance can be complex, it doesn't have to be. The complexity added to a product often hides costs, makes it difficult for the customer to actually receive the advertised service or offers redundant extras which doesn't actually provide the consumer with any real benefit.

    Edited to add...
    While I agree education is certainly part of the answer, you only have to casually browse these forums to see a number of financial products or services where people pay over the odds or don't understand what they are paying for.

    You have PPI claims where people would be refused the loan if they didn't take out PPI and that is miss-selling. They could have not taken out the loan and taken the time to have read and understood the small print, but they needed the loan and went ahead anyway even though it may not have been suitable and would cost more for no additional benefit.

    You have mortgage rates or conditions being changed that individuals didn't realise could be changed.

    You have people seemingly unaware that with an interest only mortgage, that they have to repay the principle at the end of the term. You even have people with under performing endowments who still haven't rectified the issues popping up on the forums.

    Staying on housing but deviating from financial products as such, but highlighting the illusion of choice. You have un-regulated hidden letting agents fees, unscrupulous practices and unfair tenancy terms. Yes, you can choose not to rent through a particular agent, but typically your choices are limited or non-existent, so you pay over the odds anyway.

    Then there are pensions and credit cards....

    There are whole rafts of sophisticated financial products out there. Most will bite someone at one time or another. The number and variance of products give the illusion of choice to the consumer by typically over complicating what in most cases should be a very simple and straight forward transaction.
  • Rafter
    Rafter Posts: 3,850
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    Martin,

    I'd rather turn it on its head and see products that don't meet certain criteria carry a health warning of some kind.

    I'd also like to see advertising, interest rate and product naming rules firmed up to eliminate current deceptive practices.

    For example.....

    A 12 month zero% balance transfer card with a 3% fee is actually a 3% balance transfer deal - 3% should be the biggest rate on the advert.

    A savings account with an interest rate of 0.1% should no longer be called a savings account.

    A bonus on a savings account should be less than 1% and less than 50% of the product rate.

    A high up front fee or percentage fee on a mortgage should be built into the advertised rate (spread across the initial term). A 2 year mortgage at 1.99% with a 2% fee is actually a 2.99% mortgage for example.

    It would be nice to see some 'name and shame' columns in newspapers and online highlighting the worst examples. Instead these are often the 'sponsored' products at the top of supposed best buy tables.

    R.
    Smile :), it makes people wonder what you have been up to.
  • jamesd
    jamesd Posts: 26,103
    Name Dropper First Post First Anniversary
    Forumite
    Like simple utility bills, simple products, if they come to dominate the market, will increase the costs for those who shop around, effectively saying that shops are banned from offering sales because not everyone shops during sales.

    I agree also that simple products are unlikely to be the most competitive products and are more likely to be exploitative of those they are marketed to, keeping them consistently on less good deals.

    You can potentially be part of a solution. There are already some service providers that will move money between accounts and a service that manages the money while moving it between best value accounts could deliver a combination of single point of contact plus more competitive rates.
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