Salz Review - Wall Street Journal

21
Salz Review
An Independent Review of Barclays’ Business Practices
The survey identified several concerns, including:
- Poor product selection: Customers who had bought financial products over the
previous five years had largely relied on product information and/or advice from
friends (42% of respondents). Only 21% had conducted an active search for the
best buy or consulted an appropriate professional adviser. Overall, the FSA
estimated that more than four million people had bought their most complex
financial product without considering any other option at all;
- Lack of awareness of risks: Only 40% of equity ISA owners were aware that the cash
value of their investment was directly affected by stock market performance,
while 15% of cash ISA owners wrongly thought it was;
- Weak financial ‘literacy’: 7% of current account users were unable to read the final
balance from a bank statement, while 49% of people with savings accounts could
not estimate the current interest rate level;
- Failure to plan ahead: for retirement, an unexpected expense or a drop in income.
In July 2012 a Scottish Widows survey showed that 59% of households could only
survive for up to six months if they lost their main income. 10 And a 2012 Panelbase
survey 11 found that 43% of seven-to-sixteen-year-olds worried about money and 12%
had borrowed money they could not afford to repay.
To deal with the issue of financial illiteracy, the Government announced the creation
of the Simple Financial Products Steering Group in October 2011, whose goal is to
create a suite of simply designed financial products that would meet consumers’ basic
needs. 12
This Group pointed out that given the volatile nature of the global economy, the
sharp drop in household incomes for 2010-11 and uncertain employment patterns,
“having financial provision and protection for today’s needs and the unexpected, is
even more of a necessity.” They identified three main areas of change:
- Simple Financial Products need to be clearly identifiable with an easily
recognisable badge;
- The language in product literature needs to be significantly simplified and
standardised;
- Complicated products have a role to play, but there should also be a suite of
Simple Financial Products that are low maintenance and designed to meet
essential basic needs and no more. 13
In February 2013, the Department for Education proposed that financial education
become compulsory in school curricula from September 2014. Separately, Barclays
runs a number of programmes designed to strengthen financial capability, with
approximately 745,000 people reached through this work in 2011. One such
programme is Barclays Money Skills which helps vulnerable people in the UK build
their financial skills, knowledge and confidence. 14
10 Scottish Widows, Scottish Widows UK Protection Report 2012, 2012.
11 Conducted by the Personal Finance Education Group (pfeg) and the National Children's Bureau,
11 September 2012.
12 HM Treasury, Sergeant Review Interim Report, July 2012.
13 HM Treasury, Sergeant Review of Simple Financial Products: Final Report, March 2013.
14 Barclays, 2011 Citizenship Report, 26 April 2012.