Jack can stand his round but he is not well-off. He has no savings to speak of although he knows that his pension is likely to be minuscule when he retires. Jack would like to do something about it but does not know where to start and, even if he did, the amount left after his household bills is puny.
I thought of Jack last week when I read the Treasury’s latest paper on financial capability in which it outlined plans for a new independent feasibility study led by Aegon UK chief executive Otto Thoresen, whose task it will be to research and design a national approach to generic financial advice.
Of all the people I know, Jack is one of those who would probably benefit the most from a structured financial plan and good advice. The reality, sadly, is that he does not stand a chance of getting it.
The problems involved are varied and well known. The most obvious is that Jack – and millions of people like him – simply cannot afford independent financial advice.
The cost per hour of most fee-charging IFAs is equivalent to almost his entire weekly take-home wage. Few, if any, advisers would even work for him on a commission basis.
One of the most intriguing aspects of the Treasury’s 68-page document lies in what it tells us about the current position for the many millions of people like Jack, plus hundreds of thousands of teenagers still at school – people who need advice but are unable to pay for it.
Reading through the report – and ignoring its incredibly self-serving claims about Government achievements in this area – the most striking thing is its description of the piecemeal patchwork quilt of financial projects, all aiming to give some assistance to those in need.
The document gives examples of dozens of industry and charity-funded schemes, whether in schools, colleges, day centres and elsewhere, where basic financial skills and advice can be obtained. Organisations as diverse as the FSA, Personal Finance Education Group and Citizens Advice publish leaflets, maintain websites, intervene in schools and generally do their own bit to improve things.
But there is almost no co-ordination between the projects and their funding depends on the generosity (and self-interest) of the banks and other institutions sponsoring them.
When you read of Citizens Advice and its plans to extend a pilot scheme in which IFAs made themselves available to give generic advice to CAB clients, to 25 more centres, you really do realise how terrible the situation is.
There are almost 3,000 CAB locations around England, Wales and Northern Ireland alone. The professional help now being made available through this pilot scheme is a tiny pinprick compared with what is really neededElsewhere, there is no attempt to integrate financial planning properly in classrooms and teachers receive little or no backing from local government for any sustained and meaningful initiatives with their pupils.
While Rome burns, the Treasury fiddles. Its report boasts about how the Government committed £180m in the 2004 Budget “to deliver the equivalent of five days of enterprise education to all students at key stage 4”. This is the 14 to 16-year-old group.
Then there is the £2m announced in the 2005 pre-Budget report “to pilot enterprise summer schools in 2006” and the establishment of the “National Council on Graduate Entrepreneurship”.
If I were a teenage kid today, you would never get me near any such disgustingly prim-sounding organisation as that.
Enterprise education may or may not be useful but it is ultimately no more than a minor sub-section of the more important need for decent quality basic financial education, taught in all schools, reinforced by a single, properly funded central body that can reinforce early teaching through every stage in an adult’s life.
There should be one organisation with one distinctive logo, one set of educational pamphlets and leaflets, one website, one set of trained and experienced staff that everyone knows you can go to for help and advice on any financial matter. All financial product literature should offer a phone number to call and a website to visit to find out more and get advice.
The other big question is that of who funds such a body. The report hints that, beyond the Government’s own seedcorn assistance, the industry should provide the funds. After all, there is plenty of money washing around so why shouldn’t “rich” institutions fork out?
I have no qualms with this, in theory. However, rather than leave it to individual companies, which all come up with their own initiatives, why not operate on the basis of a product levy? A fraction of 1 per cent levied on each sale, coupled with proper central Government help, could potentially generate the hundreds of millions of pounds needed to tackle the problem seriously.
Without such a vision, any feasibility study is dead in the water. People like Jack will buy their pint on a Friday night, suck on a roll-up and wonder why – when they finally retire – they cannot afford to pay the electricity bill.