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Baroness Turner of Camden: I wish to speak to Amendment No. 60, which is grouped with Amendment No. 59. The amendment seeks to write into the Bill a requirement for the provision of "best advice". I am sure that we all appreciate that many of the people who become dependent on the private insurance business to provide what amounts to social support--whether through savings or to provide for retirement and so on--will have very little experience of utilising financial services at all.
When I was chair of the PIA Ombudsman Council, many of the complaints we received arose because people had no idea of what they might reasonably expect and often they had been sold a product which was not suitable for their needs. The Bill states that people must accept responsibility for their own decisions. I support the amendment of my noble friend Lord Borrie which seeks to write "reasonable" into the clause. That is fair. But the national Consumers' Association points out that this is the reverse of the situation with ordinary goods. The Sale of Goods Act provides a statutory guarantee that goods are reasonably fit for the purpose for which they are needed--my noble friend referred to that in support of his amendment--and that is surely important when it comes to financial products. Purchasers may be making decisions which are desperately important for them and for the financial security of their families.
There is of course a need for better education in relation to financial issues. When I was at the PIA I had to produce a report each year on the work of the Ombudsman Bureau, and we made a particular point each year of emphasising that. It would be a good idea to emphasise in legislation a requirement to provide a product suitable for the client's needs, a "best advice" requirement. I hope that the Government will be prepared to accept the amendment.
Lord Jenkin of Roding: Perhaps I may say a word, principally in response to the speech of the noble Baroness. The phrase "best advice"--which entered into the language because it was included in many of the rule books--is a misnomer because no one really knows in most circumstances what would be the best advice. "Good advice" can generally be described, and one can form a view as to whether the advice that was given to a particular consumer was good. In the vast majority of cases it should always be sufficient to say that the consumer had good advice. I hope that the Financial Services Authority may come to recognise that that is a better test of advice than "best advice" when, with the best will in the world, most people are not able to say which is the best advice that the consumer might have been given.
Perhaps I may take up a point made by the noble Lord, Lord Borrie. He referred to the Sale of Goods Act. That Act was the first statutory provision for the balance between buyers and sellers in the sale of goods. I was brought up to believe that it was one of the finest Acts on the statute book. It was short and made clear to everyone exactly what the duties were. My recollection is that it contained no more than 20 or 30 clauses. The Bill we are discussing must be 100 times longer in terms of the number of pages and words simply because this legislation deals with matters infinitely more complex than the sale of goods 100 years ago.
Nevertheless, the principle must remain: if someone spends money on a product, some part of the responsibility must rest with the buyer. One has heard a great deal about mis-selling. There undoubtedly was mis-selling. But, equally, there was a great deal of "mis-buying". People were no doubt induced by stories and by friends to rush in. Look at what is happening presently in the ".com" revolution. I suspect that there is a great deal of mis-buying rather than mis-selling going on. I believe that there is some responsibility on buyers, whether of goods and services or of financial products.
I am not sure whether the word "reasonable" is necessary. It always sounds churlish and unreasonable to resist the inclusion of the word "reasonable" in a statute. But I am not sure that it adds anything to this provision. The clause is based on the general principle that consumers should take responsibility: that should be enough. If this amendment is intended to water down that concept, I should resist it. I believe that consumers should take responsibility. Equally, a huge burden of regulation is being imposed on those who sell products to make sure that they sell them responsibly.
Lord Lipsey: I am tempted to speak partly because the noble Lord, Lord Jenkin, referred to the difficulties with the concept of "best advice". As I am sure he knows, the rule book of the existing regulator also contains a concept of "better than best advice". If noble Lords have three or four hours to spare after our debates, I shall be delighted to explain its impact.
This is a tricky issue, and we are indebted to the noble Lord, Lord Borrie, for raising it. The trouble is that in this area it is very hard to get consumers to take responsibility. People who will not buy a microwave without touring every shop in south London before forking out £100 will, however, buy an extremely expensive pensions policy on the least possible examination. Every salesman will tell you that when he hands over the "key features" document, which he must hand over before selling a product, the customer will say, "Do I really have to read this?" That is a very difficult question for the salesman to answer. The regulator would have to say that he should answer "yes", and the salesman would like to think that he could say "no", so he probably says "yes" and "no".
It is important that the Bill should emphasise the responsibility of consumers with regard to financial products. If they rely entirely on those who are flogging them to take the full responsibility, that will never work. A much better understanding of the products and what they can deliver is needed on the part of customers in order to fulfil their objectives. But at the same time it is important that regulators, and those of us who are discussing the Bill, should realise that there will never be consumers out there in the real world who are able to give the full force of their attention and who have the full range of concepts available to assess every aspect of the product that is laid before them.
The amendment seeks to move the balance just a fraction in favour of not relying too much on consumers. It goes to the essence of that balance. I would lean by a millimetre towards accepting it and accepting the point made by my noble friend Lady Turner in speaking to her amendment. It is a narrow point. If Ministers feel that this is a carefully negotiated balance, they would be justified in saying that they believe the balance lies the other way.
Lord Sharman: In rising to support these amendments, I should like to develop the thought introduced by the noble Lord, Lord Lipsey, that this is an issue of balance. The amendment seems to suggest that in Clause 5(2)(d)the balance of responsibility has moved too far towards the consumer and away from the provider. We see that as particularly important, because financial services are complex. They are purchased relatively infrequently--probably less frequently than the microwave referred to by the noble Lord, Lord Lipsey. In many cases their performance can be judged only over a relatively long term. It is therefore important that the balance between the responsibilities of the provider and those of the consumer should be somewhat more in favour of the consumer than under the Bill as presently drafted.
I was struck by the comments of the Financial Services Consumer Panel. The noble Lord, Lord Borrie, referred to the panel's report. In the letter that transmitted that report, the chairman of the panel, Barbara Saunders, said:
Lord Alexander of Weedon: For me, too, the balance comes down fairly and squarely in support of both amendments. I understand the anxiety of my noble friend Lord Jenkin regarding the concept of "best advice" to which the noble Baroness referred. "Best advice" is an elusive ambition. It is very difficult, given the multitude of products on sale, to expect "best advice" to be achieved by every independent financial adviser. As I understand it, the amendment proposed by the noble Baroness does not import the concept of best advice; it imports effectively the concept of "sale of goods".
If that applies, say, to the purchase of a microwave, as already mentioned, I have no doubt that it ought to apply to something as important as people's long-term savings. I remain of the view that, however well products are explained to people, the choice is not easy to understand. It may be that I am over-scarred by memories of the Securities and Investments Board and the need to redress the pensions mis-selling issue. But that issue was wide in scale. It affected very respectable organisations and smaller providers alike. No one within the market was immune. The damage to confidence in the industry was considerable and there was a need for consumers to take responsibility for their pensions. Considerable anxiety was caused to consumers by the need to enter into the process of redress.
This is a dynamic industry and--I know that I have come back to this point several times--there has been a growth in the type of services, including long-term healthcare, which consumers are having to take for themselves, in my view rightly. In that sense consumers are taking rightful financial responsibility for their future. I should like to see that develop further. But I see the counterpoise as being proper consumer protection. On that basis, I think both amendments are wholly reasonable.
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