William Kay: Finance industry demand for school money classes

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The Independent Online

Gordon Brown, the Chancellor, must be hugging himself with glee. Just as the pittance being spent on financial education was threatening to become a political embarrassment, a leading figure in the fund management industry has publicly declared it should encourage and pay for better education out of sheer self-interest.

Wolfgang Mansfeld, president of the Féderation Européenes des Fonds et Sociétés d'Investissement, the Europe-wide body representing fund managers, said this week: "Investor education and the regulation of intermediaries has to become a bigger concern for fund managers."

In case there was any misunderstanding about Mr Mansfeld's motives, he explained. "The fund management industry should not hesitate to help investors because, in the final resort, fund managers will be blamed if things go wrong. Investors rarely blame themselves."

Fear of blame is a wonderful incentive to get things done. It beats altruism any day. That is why I think Mr Mansfeld's musings offer the best chance financial education could have.

So far the efforts have been far too diffuse to be effective. Both the UK government and the financial services industry have paid lip service to the excellent Personal Finance Education Group, but have kept it so starved of funds that it has been able to perform no more than a peripheral role.

Banks such as NatWest and Barclays have undertaken valuable initiatives to send their own people into classrooms to put across basic messages. But these have not been co-ordinated with a wider programme for teaching finance in schools.

For a long time there was resistance among teachers, but there are signs this is becoming less of an obstacle. And the launch of a personal finance GCSE should stimulate more interest and prompt a more organised approach. The Financial Services Authority has a statutory obligation to promote public understanding of the financial system, but it allocates a tiny proportion of its budget to this vital activity.

Now it has finally dawned on someone, in this case Mr Mansfeld, that Government happy-go-lucky efforts to transfer responsibility for retirement provision from the state to the individual requires individuals to know their way around the financial maze.

The rising tide of compensation claims for mis-selling has routinely been derided as a symptom of the compensation culture. But the anguished calls for compensation for oversold investments usually stem from one-sided conversations in which a sales person wants to clinch a deal and a customer vaguely wants financial security.

We must have more equality on both sides of the table in such dialogues, and the only way to achieve that is to spend more time and money on educating children on how money works. Then more charlatans will starve and more people will have the confidence to make the vital decisions to provide for their own futures.

* One of the more unexpected announcements in Mr Brown's Budget this year was his call to examine the case for Britain developing a market for long-term, fixed-rate mortgages. There has never been much sign of demand for such mortgages.

But London & Country, the mortgage broker, has asked 570 mortgage borrowers what they think. Nearly two thirds thought they were a good idea, but more than a quarter preferred variable interest rates and nearly a third did not like being confined by the redemption penalties if a long-term mortgage was repaid early.

The essential problem is that these mortgages would have to be highly flexible and portable. The survey found no one questioned had lived in their home for more than seven years. Plainly, a lot of people do stay put for longer, but not to find one out of 570 shows people are moving more frequently. In that case, the long-term mortgage is even more inappropriate unless it can accommodate such customs.

The assumption has been that the 25-year mortgage would be the first type a young borrower would arrange, adding to it as he or she moved over the years. But the greater tendency for relationships to break up more frequently is one of the major worries behind signing up to a long-term financial commitment. That is the problem the Chancellor must address if 25-year mortgages are to catch on in a big way.


William Kay is Personal Finance Editor of 'The Independent'

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