Iam sure I was not the only IFA seething as Ed Balls was unveiled in his new Cabinet role. Balls has hardly disguised his contempt for IFAs, noting that he was surprised that so many had survived.
Now he his ensconced as minister for children, schools and families and within days has announced an initiative to educate the youth of our nation on matters financial in a more formal manner as part of a revised curriculum.
Balls takes some getting used to. Never a media darling, I imagine the opposition relish his raised profile as he can come across as either abrasive or slightly underdone in interviews. Yet he does have a serious role for the Brown administration, tackling ominous spectres from a somewhat peripheral position – namely bulging personal credit levels and their impact on the nation’s personal finances.
In essence, when this Government eventually crumbles to the demands of universities and removes the £3,000 cap on tuition fees and then starts applying a commercial interest rate to student debt, it is very likely that most graduates will emerge from their studies with expensive debt of nearly £30,000.
They will perhaps marry another graduate, also with a £30,000 debt, and then hope to buy an average first-time buyer home with a mortgage of, oh, I don’t know, let’s say £140,000, meaning they start their professional lives together owing around £200,000.
Now call me cynical but any couple in that much debt is unlikely to be anything but compliant and cautious at work. I think the employer will be very happy with that. I cannot imagine a pension will be a high priority either. Nor will they rush to start a family.
I remember being a panellist at a Money Marketing roadshow with a couple of life company chief executives rambling on about platforms and open architecture. I made the point that sensible debt management was a bigger issue and that I could envisage a day when we had state-sponsored financial advice to tackle it provided by those IFAs who know just about everything in the CFP syllabus backwards but who find two people in a financial planning meeting approximately one too many.
In short, they lack the social and sales skills to motivate people to take action but can assess and advise with the best of them. Our industry is full of these people and we could potentially use them productively at the state’s expense. The CEOs laughed at this, of course. It was unthinkable to them.
Yet we have hints of exactly that. There is a school of thought in both the Government and the FSA that educating the masses is the surest form of strengthening compliance and avoiding misselling.
Even Balls stated that “money plays a crucial part in our lives and I want teenagers to start learning early how to make the most of their money”.
I can see the future now. It is summer 2020 and hordes of financially astute Ibiza clubbers are self-managing their child trust funds by shorting pork belly futures and cornering the market in copper and platinum commodity derivatives, the little monkeys. How useful those year 10 classes in personal finance were. It just is not going to happen, is it?
How can we provide something that everybody needs, nobody really understands and avoid the misselling that thrives in any such environment?
Well, I think education is still the answer and perhaps Ed Balls is on the right track. What we need now is state commitment to financial services prov-ision and education, a harmonisation of the interests of consumers, providers and distributors and a regulator that enhances the positives, diminishes the negatives and can tell the difference.
Balls may do well to realise that IFAs, the group he was so disdainful of for so long, offer many if not all the solutions. I hope he will.
Steve Buttercase is a senior adviser at M2 Financial.