FSA launches consultation on league tables for consumers

Howard Davies said:

"This is an important new initiative for consumers. It is enormously difficult for consumers to make sense of the vast array of information on financial products. So there is a pressing need for authoritative and understandable information that identifies and compares the most important differences between products. Publishing such information should help consumers to shop around more effectively, and so help bring about a more competitive market. But developing robust and objective comparative information is a complex and challenging task. We are publishing this Consultation Paper to stimulate discussion and debate about how this work might best be taken forward."

The Consultation Paper sets out the results of feasibility work carried out by the FSA, looking particularly at a range of five savings and investment products. But comparative information on a much broader range of products, including for example mortgages and retail banking services, could potentially be included.

The Paper discusses the feasibility of developing tables that would allow consumers to compare the products of different companies across a range of indicators including price, flexibility, risk and reward, financial strength, quality of service and product features. The feasibility work suggests that past performance should not be used as an indicator by the FSA for investment products because it does not provide a reliable guide to future performance. The Paper also outlines the results of consumer research carried out this summer to test the usefulness of comparative tables.

Christine Farnish, FSA Consumer Relations Director, said:

"The feasibility work has shown that it is possible to develop tables of comparative information showing how particular types of product compare across a range of indicators. We have been encouraged by our market research findings which show that consumers would welcome having comparative information from an authoritative source. The research shows that they can understand such tables, find them useful, and that they are able to select companies on the basis of making trade-offs between different indicators depending on which indicators are important to them".

It is proposed that tables would list products by company in alphabetical order, without any overall ranking, in order to enable consumers to decide which indicators were more important to them.

The Consultation Paper makes it clear that comparative tables would be of value once a consumer had decided what sort of product was suitable for them, prompting them to consider a number of issues or ask questions of their adviser before finally selecting a specific product. The tables would compare products of a particular type on a like-for-like basis, and would not be a substitute for advice on what type of product was suitable for a particular consumer.

The Consultation Paper requests responses from the industry, consumer representatives and other interested parties on a range of issues including:

what products should be included in any Comparative Information Scheme

which indicators should be used, and how they should be defined

what role should the FSA play in the development of any Scheme

Responses are requested by 14th January 2000. In order to facilitate the consultation process the FSA will be holding a free one day workshop on 29th November in Central London.

Notes for editors

The document published today by the FSA is Consultation Paper 28 "Comparative Information for Financial Services". http://www.fsa.gov.uk/pdf/cp28.pdf

The feasibility work included work on five products which were: personal pensions; investment bonds; unit-trust ISAs; savings endowments and mortgage endowments.

The FSA was supported in its work by the consultants Bacon & Woodrow. Their Report to the FSA (Comparative Tables) is also published today by the FSA and is available from the FSA price 30.

The FSA was also supported by the research company Reflexions. A summary of their work is included in Annex 1 of the Consultation Paper. A detailed report will be published by the FSA shortly.

The FSA is also publishing a Consumer Factsheet to facilitate consumer feedback and debate. Free copies are available from the FSA leafletline 0800 917 3311.

The FSA will be holding a free workshop in London on 29th November to discuss the issues raised in the Consultation Paper. Anyone with an interest in the subject is encouraged to attend and to give their name and address to Rebecca Neasham, Consumer Relations Division, 020 7066 0916, fax 020 7066 9713, e mail: rebecca.neasham@fsa.gov.uk