Turner wants savvy consumers

Financial Services Authority (FSA) chairman Lord Turner has said consumers must have more financial knowledge for their own protection.

Speaking at the FSA’s Financial Capability ‘Helping Consumers through the Recession’ conference in Cambridge, he said: “It is common sense that people armed with skills, such as budgeting and planning ahead, as well as up-to-date information about new products, will be better able to cope with what life throws at them. It is also common sense that consumers will be more confident and trusting if they know a robust system of consumer protection is in place to ensure firms act in good faith.”

Financial capability programme

The FSA’s financial capability programme aims to enable better informed, educated and more confident consumers, who are able to take greater responsibility for their financial affairs and play a more active role in the market for financial services.

Individual projects focus on specific groups in the population, targeting information and help to the specific circumstances they are facing. These groups include:

• new parents
• young adults
• students
• employees
• people requiring generic money guidance.

This year’s conference will explore ways to reach people facing redundancy, the unemployed and hard-pressed families, the FSA said.

Markets may not work

Lord Turner said that markets may not always work for the consumer and, sometimes, human behaviour means that too much choice can result in consumers taking no action.

This raised radical questions such as:

• Can there be too much innovation in some markets – with complexity acting as a barrier to understanding?
• Are some products too complex to be sold to consumers at all?
• Should we be prepared to intervene on pricing, even at the expense of access to the market for some people?

Lord Turner said: “I don’t pretend to have all the answers to these questions today. Or, indeed, that there are blanket answers that apply to every market or product. But what is clear is that consumer protection, financial capability and market intervention to protect consumers needs to be seen as part of an integrated strategy. And this needs to be grounded in an understanding of what role each element plays in empowering consumers and building their confidence in the market.”