OPINION: Household finances

Regular readers (hello, you two) will remember that I was last month detained by an investor coalition at Harvard University. This month, I find myself equally charmed by a Brussels-based organisation named EuroFinUse, which has a similarly hand-knitted feel.

OK, it’s a terrible name (perhaps not as bad as PricewaterhouseCoopers or AllianceBernstein). And you do have to wonder about the marketing nous of an organisation that runs a competition with a prize of a trip to the European Parliament (second prize, two trips). But EuroFinUse – short for the European Federation of Financial Services Users – does have some interesting ideas.

It is a not-for-profit organisation whose objective is “to influence financial regulation policy to directly benefit all financial services users”.

The organisation makes the point that as households are the main source of funds to finance investment (an assertion based on information in a March 2013 Green Paper on the long-term financing of the European economy from the European Commission), European financial policy should be geared more towards helping savers and less towards helping “the powerful lobbies of the financial industry”.

“The establishment of an adequate counterbalance to the disproportionate influence of these lobbies on financial policy making is crucial if finance is to serve the real economy and society as a whole,” says EuroFinUse. The organisation has come up with a Better Finance manifesto to achieve this and is asking political parties to declare their colours on it ahead of the European parliamentary elections in May.

The manifesto contains four principles. They are presented in a blizzard of bullet points, but I discern them to be as follows:
1. Get investor savings into the real economy.
2. Improve and harmonise investor protection (this involves the often talked about but seldom seen level playing field for investment products in Europe – dream on).
3. Improve the supervision of financial services providers.
4. Eliminate tax discrimination against savers.

You may or may not agree with these principles and the details of how they should be implemented (which are copious). But it’s good that they’re thinking about it, isn’t it?

Whether or not you agree, the existence of EuroFinUse demonstrates two things. First, individual investors and savers – as noted on our visit to Harvard – are getting more bolshie. Second, trust has not yet been restored in the financial services industry.

This helps to explain the findings in a recent survey – How do savers think about and respond to risk? – commissioned by the UK Pensions Institute at Cass Business School. The survey found that more than half (52%) of British savers would prefer to suffer a shortfall than take any risk to generate potentially larger returns to meet their savings goals.

It puts this down to “failure to properly think through their savings and investment needs” on the part of savers. Yeah, well, maybe. Or maybe they did think about it but the trust wasn’t there. I know that whenever I think about reviving my sorry excuse for a pension, the first question that pops into my mind isn’t: “Have I properly thought through my savings and investment needs?” It’s: “Are they going to rip me off? Again.”

How can financial services providers solve this problem? By being trustworthy, I guess. Telling the truth. Not cheating people even if you can. That kind of stuff.

In the meantime, there’s a free trip to Brussels to be won, people. All you have to do is propose one additional solution (maximum 300 words) to tackle financial travesties detrimental to society to EuroFinUse by March 28. What could be simpler?

Fiona Rintoul is editorial director at Funds Europe

©2014 funds europe



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