Finance unit 2.9

• It is never possible to know everything about a product and there is always an element of risk in every financial transaction
• This is especially so where the product is complex
• Life insurance endowment policies

  Complicated, hard for a customer to know what the policy is worth at any point in time because the value is affected by stock exchange returns and by the charges made by the insurance company
• The insurance company will send them an annual statement of the position of their policy but most people do not know enough to be able to assess whether or not this is a fair value
• People should also take into account factors that might change during the period they are using the product, for example changes in their personal circumstances or in the economic situation in the country
• They should seek updated advice every year to make sure that their financial plan is still on track and that their needs have not changed without their realising it
• Making a bad choice can have unfortunate consequences, although with short-term products, such as a current account or instant access savings account, it is easy to switch to a different one
• But medium-term and longer-term products – long-term savings accounts and mortgages for instance – are relatively inflexible and people need to know these facts before committing themselves
• They can experience problems with financial purchases if they do not understand the agreement they are making
• While the law provides some protection against bad advice and the selling of unsuitable products, consumers should remember that there is always a risk
• Nobody can predict the future and economic conditions can change in unexpected ways
• No financial provider or adviser can ever guarantee that a particular product will be successful and consumers should be wary of any who try to claim this
• What a potential customer needs to know about themselves

  • Set out their needs, wants and aspirations over several timescales
  • Know their present financial position
  • Be aware of the assets they own and the liabilities they owe
  • Consider the financial risks they are taking and how well protected they are against these risks
  • Know their own 'financial personality' - their attitude to risk and the way they manage their money
• What a potential customer needs to know about solutions available and their providers

  • Know the main product sub-headings - savings, investments, borrowing and insurance products
  • Understand the purpose behind each and how the products work in a general sense
  • Consider whether the way the product works is suitable for them
  • Have knowledge of the providers that make these products available - whether they are safe and have a good reputation for reliable service, how information on them can be accessed and how they can be contacted
• What a potential customer needs to know about product brands

  • Benefits they might gain from them
  • Costs and risks
  • Extent to which they are flexible
  • Service levels
  • Terms and conditions
  • Degree to which they coincide with someone's requirements
• There is a wealth of information available and sometimes it may seem to be too much
• People need to know where to go to find this information and then to understand what it is telling them
• The Financial Conduct Authority requires the information given by financial services providers to be fair and not misleading and to highlight any special risks
• Most providers have signed up to codes of practice which require that their marketing literature and the terms and conditions in their contracts are in plain English, so that everyone can understand what they are agreeing to do and whether the product is suitable for them
• Providers must give prospective customers clear, relevant information that is not misleading and highlights any special risks
• If the product information is misleading, the provider might have to compensate the customer later if they buy after being misled by the literature
• The provider should point out to the customer any costs, penalties or other obligations attached to the product to try to ensure that the product is suitable for the customer's circumstances
• Marketing brochures and leaflets

  • Give some details about who the product is intended for and how it works, but in a general sense
  • Include an application form for a customer to complete
  • May contain a list of current interest rates on various products
• Providers, and especially the large banks and credit card companies, also send out marketing literature through the post and carry out telephone marketing
• People are always advised never to give any personal or financial details over the phone
• They are also advised not to buy a product in response to a cold call but always to institute the purchase themselves
• Receiving paper-based materials through the post can also be annoying and may influence people against buying the products
• Provider websites


  • Give information on the wide range of products offered under various headings
  • Allow prospective customers to buy and manage the products online
  • Include a facility by which people can email questions, and a helpline number is usually given so that customers and prospective customers can discuss their requirement or problem with a member of staff
  • Usually have a facility for a prospective customer to make an application online
• Provider websites are regulated in the same way as printed marketing materials and the information they give must be clear and accurate
• Once they have signed up to a product - a savings account, for example - they can manage it online so they can always see their latest position
• TV and radio advertisements

  • Do not give a lot of information and are intended mainly to publicise the provider's name as widely as possible
  • Seek to build awareness of the brand, some with a comic approach, others by associating the brand with a lifestyle
  • Some terms and conditions are always given at the bottom of the screen but it is doubtful whether viewers and listeners pay much attention
• A prospective customer can arrange an interview to discuss their financial needs with a member of staff of a bank, building society or credit union, either at the branch or by asking for a home visit
• The member of staff can be expected to have good and accurate knowledge of the products offered by the provider and will have been trained to suit the product to the needs of the customer
• However, their advice will only relate to the products provided by their particular company
• It is advisable for customers to 'shop around' by arranging interviews with the representatives of several providers
• Information from the media


  • A lot of information is available via the mass media and, since it does not originate with providers, it is unlikely to be aimed at making sales
  • It is also free but people can never be sure if it is reliable as some of it might be biased and incomplete
  • They do not know if the information is accurate or whether the products being discussed are suitable for their needs
  • If they rely on advice from these sources and it turns out to be unsuitable, there is not much they can do about it
  • The media can be good sources of information but people should always seek professional advice and never rely on them alone
• Money Box


  A programme on BBC Radio 4 which gives information on financial products but does not aim to market them - its main purpose is to identify problems that people might be having with particular products or to warn listeners against scams
• Newspapers


  • Most of the UK's national newspapers have a personal finance / money section in both their paper versions and their online websites
  • They contain a selection of current stories on personal financial products and warnings against problems and scams
  • There is often a strong lifestyle feel to their articles and they contain the stories of specific people who have either benefited from or had problems with a product
  • Newspapers provide a range of financial information including best buy tables, articles about new products and consumer advice
• Price comparison websites


  • Enable customers to compare financial products more easily and thus to make informed choices
  • Contain 'best buy' tables and quotation tools
  • Can be very helpful but customers are still advised to spend some time researching the various products because the comparison website might not compare like with like
  • Customers also need to bear in mind that price comparison websites are often 'brokers' for the products that they include in their tables: this means that the company running the website earns commission from the financial services provider if people buy a product via its comparison site
  • This may influence the products such a site includes and recommends
  • They tend not to have a 'whole of market' focus and so each excludes certain products that might be more suitable for an individual customer than the ones listed
• Advantages of price comparison websites

  • Consumers can access an at-a-glance list of products from different providers and this helps them to make a choice
  • Consumers can get information on a number of providers without contacting each separately and this saves time
  • Consumers can find 'best buy' tables
  • Consumers can enter their own specifications and find products that suit their needs