FOOL'S EYE VIEW
You're Wasting £700 A Year

By Jane Mack (TMFJane)
October 29, 2002

This morning the Financial Services Authority launched the results of their latest survey which revealed that, er, consumers should shop around for better deals.

Actually, although I'm thinking 'Duh!' about their latest report, I'm also wondering why so many of us are still apparently prepared to accept the first deal we're offered. According to the FSA's report, consumers could save more than £700 a year by comparing prices on financial products and services such as current accounts, mortgages, credit cards and personal loans. So it seems from all the evidence that the FSA has a point. We consumers are clearly stoopid.

Indeed, confirming the 'consumer is a dunce' theory, only last week the FSA's managing director, Carol Sergeant, told a retail banking conference that we are so financially illiterate that it was up to the industry to ensure that the small print was explained properly to us poor souls who clearly don't understand money.

Okay, okay. Maybe she wasn't quite so harsh about us consumers. What the FSA later told me was that the purpose of her speech was to "remind banks that consumers are not well equipped to deal with the financial planning responsibilities being placed on them."

Unfortunately, Carol Sergeant has got a point too.

The statistics she used during her speech included:

• One in four adults cannot calculate the change they should receive from £2 after buying three items costing less than that.
• A significant number thought 10% of £300 was worth no more than £25.
• One quarter of pension and endowment policy holders did not realise that their money was invested in the stock market.
• Only 64% of consumers might be expected to draw the correct conclusion when comparing 2 different APRs (ie: that a lower APR indicates better value for money).
• 23% of a sample of around 4000 people could not correctly answer what a percentage is.

The thing I can't quite get my head around is that she said we, as consumers, are obviously so bad with numeracy matters that it's up to the banking industry to explain things to us properly.

Is this where I get to say 'Duh!' again? Didn't they have a responsibility to do that in the first place?

While the FSA is right that consumers have failings, I think they've got a bit of a cheek pointing out our own inadequacies at maths when they have been fining the industry left, right and centre ever since they took over its supervision back in December 2001. Do I even need to mention pensions mis-selling? Red Warnings for Endowment Policies? Split Capital Investment Trusts? Equitable Li.....?

There have been many financial disasters that have come to light since the FSA took full command of the financial services industry. That's a good thing, obviously. But to counsel the very industry (who've caused all the problems in the first place) by explaining that their customers are a bit lame when it comes to finances, is a bit much.

It appears that we consumers would cease to be stupid, trusting idiots if the finance industry stopped being so obfuscating when persuading us to spend our money with them.

Duh!