Watchdog proposes jargon-free finances

"Key facts" document would provide basic information

Consumers who find marketing-speak and financial jargon baffling are being offered some help from the City's watchdog.

The Financial Services Authority is proposing a "plain English" rule for promotional literature, which will help make it easier for consumers to understand what they are buying.

Key Facts

Clearer charges and costs

Basic information

Frequently asked questions

Quick guide

Central to the plans is a new "key facts" document designed to offer concise and "punchy" information on individual products, and which will be separate to the product's marketing literature.

The City watchdog - not always known for its complex-free press releases - says the new plain English campaign will cost the industry £110m to introduce.

A better read

Opaque product costs and charges can often make it difficult for people to understand whether the product is worthwhile investing.

The new product literature also aims to give consumers a better idea about realistic costs.

Firms would be shown how the charges could eat away at an investment return over time.

For example, someone buying a unit trust would be shown how its growth would be affected by an annual management charge.

The document would also offer help to consumers who did not know how to compare costs.

Expensive errors

Mis-selling of financial services products has cost the financial services industry billions of pounds over the last few decades.

The document would also contain a "quick guide", aimed at highlighting the most important factors that consumers should think about before buying.

For more complex queries, a frequently asked question section would give the main terms and conditions, and tell consumers how they could get further information.

One of the FSA's main aims is to improve consumer understanding of the finances.

John Tiner, FSA managing director, said: "Better informed consumers are less likely to make the wrong choice and more likely to become confident investors.

"We believe these benefits will offset the cots of making the changes."

To allow for he expense of introducing the new product guidance, the promotional literature will be phased in over three years.

Literature on Isas, unit trusts and all pension products will have to comply within a year, savings and mortgage endowments within two years, and all other products within three years, the FSA said.