The Financial Services Consumer Panel warns that Ron Sandler's wish to simplify the sale of savings products, published in his report for the Government today, is in danger of being achieved at the expense of consumer protection.

The report proposes to encourage the sale of "safe" stakeholder products, based on investment in shares, by allowing firms to sell them without regulated advice. The rules insisting that firms give ‘suitable advice' and ‘know their customer' will be abandoned. The Consumer Panel, however, points out that the mis-selling scandals such as personal pensions, mortgage endowments and pension top-ups have all been the result of firms making unsuitable sales.

Colin Brown, Chairman of the Panel, said:
‘Under the proposed regime, the consumer will need to know more about financial planning than the salesperson. All responsibility for matching a product to a person's needs is being pushed on to the customer. Even if a stockmarket-based product is made better and safer, it can still be wholly unsuitable for a particular individual – and we think it is wrong to encourage that person to buy it. The Sandler plans are to sweep away the suitability rules which protect that customer.'

Colin Brown, Chairman of the Panel, continued:
‘If the Government is expecting consumers to take over responsibility for judging when share-based savings are suitable and unsuitable, then it must offer them some help. It should establish a comprehensive advice service that ordinary people can turn to. Without it, people will be led into serious mistakes.'

The Consumer Panel has already put forward proposals in June 2002 for Government and the Financial Services Authority (FSA) to establish a new service to offer financial planning advice to the majority of consumers, including those on middle and lower incomes. This advice service would provide generic advice on how individuals might save and manage their finances, and the types of products which they should then go out to buy. It would be totally separate from the sales process for financial products. Many of the other aspects of the Sandler Report are welcomed by the Consumer Panel – particularly the recommendations that the FSA should give more emphasis to consumer education. The Panel looks forward to having further dialogue with both HM Treasury and the FSA to ensure a fair deal for consumers as the details of these recommendations are worked out.

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Notes to editors