Two weeks ago I had the job of chairing a panel session at the ABI's annual conference on Sandler products. One point emerged from the debate with blinding clarity. In the Government's attempt to work out how to extend savings, there is a fundamental problem: basic practicalities.
The industry has had some modest success in persuading civil servants at the Treasury and the FSA that savings products are not bought, but sold – and that stakeholder products might have to cost more than 1 per cent a year. But it is still far from clear that the Government's plans are either practical or workable.
First, the risks are bigger. Most of those on average or low incomes count their savings in hundreds, not thousands of pounds. They are only likely to invest modest contributions through a regular-premium plan. If charges are low, then life offices cannot make a profit out of these sales unless contributions continue without stop for at least 15 years.
But official figures on persistency make that practically impossible. The risk of those policies lapsing through unemployment or divorce is high. Even when the economy is good, more than one in three lapse in the first five years. By the end of 20 years, less than 10 per cent of regular premium policies are still active.
If the Government expects life offices and other to sell Sandler products too cheaply, it is expecting them to take what would normally be regarded as an unacceptable commercial risk, selling a product which, they can be fairly sure, will lapse before they have had the chance to make a profit. And the further down the income scale you go, the bigger the risk of lapsing becomes.
The failure of stakeholder pensions to encourage significant new saving among those who do not already save proves the point. Lowor average-income savers cost more to reach. In fact, to use the language of LloydsTSB's financial adviser training programme, they have to be “disturbed” into saving. And that carries a cost.
Even if you try to deregulate the advice process and use “guided self-help”, someone has to be paid to take time in the simple task of making punters part with their money and you cannot simply wish that time and effort away with talk of encouraging employers to take part.
Personnel departments are already snowed under with red tape and cannot be expected to implement yet another Government project at a cost to their time and budgets.
The Government has softened on the 1 per cent issue and clearly now thinks it can solve those practical financial problems by raising the level of charges. But there is the rub.
The industry has been peddling a lie. The pretence has been that it is the cost of giving financial advice, or the cost of regulating it, that makes it difficult to reach those who do not save already. Nonsense. Even if you scrapped regulation altogether and gave no advice, you would still face both the risks and the costs outlined above.
For once, can we be honest? We are not talking about financial advice, we are talking about sales.
Please bear with me if I am upsetting you. Too often the phrase “financial advice” is used to lend a spurious higher purpose to what is actually a fairly basic sales process: getting punters to part with their money. The public have a vague suspicion that that is the case, and the industry knows it, which is why good IFAs care so much about having the word “independent”.
Being called a “financial adviser” can sound vaguely dodgy. The public might mistake you for someone who just wants to sell and collect commission, with your financial interests taking precedence over theirs. Call yourself independent and you can distinguish yourself from your unscrupulous former colleagues at the life office where you started out.
No offence. The real benefit to the economy that you, the readers of this newspaper, give is not through bestowing financial advice on the nation. It is through persuading us to save and invest.
Do not tell me those two activities – selling on the one hand and advice on the other – cannot be separated. Most people's need for financial advice is not the same as their need to be persuaded to save. In fact, Gordon Brown's means-tested approach to pensions has made sure that for many, if not most, the best advice is something an IFA could not possibly make a profit from saying: don't save, because if you do, you lose.
Independent financial advice is a service only for a minority of above average earners. So let us stop pretending. For the majority the real need for financial advice is simply not catered for by this industry. They need to know how to manage their debts.
Turned away by good financial advisers, they end up, if they are lucky, in the hands of a lightly trained, unpaid volunteer at the local Citizens Advice Bureau. If they are unlucky, they end up in the hands of the huge number of unscrupulous and unregulated firms claiming to help with debt management and consolidation.
If the Government really wants to help those who do not save, it should forget about Sandler products – and regulate that lot.
Andrew Verity is a personal finance reporter at the BBC