With the Labour Party Conference in full swing, here’s the second of our politician Q&As. This time we quiz Chris Leslie, Shadow Financial Secretary to the Treasury, on the current state of financial services.
Q. Do consumers currently get a good deal from financial services?
I’m very worried that there are a large segment of consumers who are busy, distracted, stressed or uninformed and as a result they do not necessarily make the best judgments when it comes to choosing products that are right for them.
Unfortunately, those selling products are aware of this inertia and lack of financial literacy and too often make profits on the back of poor customer choices. Government and regulators and the industry itself have to do more to counteract this imbalance and to protect the best interests of consumers.
Q. What do you think has been learnt since the financial crisis?
There are lessons to be learned by governments, international bodies, regulators, institutional investors, credit ratings agencies and the banks themselves – but I’m not sure yet that we have adequately protected against the risk that taxpayers ultimately have to pick up the pieces for market failure.
Q. Do you think the proposed new structure of financial services regulation will work, or is there more to be done?
While I agree we need to develop the concept of prudential regulation I am worried that the Conservative Party didn’t think through, when they were in Opposition, the consequences of designing a ‘twin peaks’ set of structures which don’t fit comfortably with the thematic approach pursued by the European supervisory regulators.
The European powers are substantial and in many ways overrule the UK plans. Moreover, there are inadequate accountability devices for the very powerful Bank of England in the exercise of the macroprudential powers and the Bill needs to address this.
Q. What do you think about the level of choice available – are there too many, or too few, banks?
I don’t believe we have sufficient choice or competition in our current banking structure, and the government seem unconcerned about this. They should have worked harder to think about possible solutions, including the feasibility of remutualisation of Northern Rock.
Q. Do you think bank branch staff should be incentivised to sell financial products to customers?
Banks will invariably want their employees to focus on profitability but there is also a need for banks to ensure they are fair to consumers and not pushing inappropriate products. The danger of commission based sales is that the driving factor is revenue rather than sustainability, which could store up big problems for the future.
Do you share the same concerns as Chris about the current state of financial services? Do consumers have enough choice and how should financial services be regulated in the future?