FEAR OF FINANCE

On the face of it it has been another bad week for the personal finance industry, with the Consumers' Association criticising the quality of financial advice given by some independent financial advisers, many accountants and solicitors and most tied agents, the Court of Appeal opening a precedent for borrowers in arrears to insist on rescheduling their debts over the whole life of their mortgage, and the Banking Ombudsman launching a bitter attack on mortgage lenders for failing to give refunds on mortgage indemnity guarantee policies when they are no longer required.

Opinion polls still suggest that less than half the adult population has a clue, or even a care, about personal finance generally. There is also a deep-seated reluctance on the part of the punters to buy insurance products which they might not need, like private health insurance and long-term health care, or where they feel the cover is likely to be expensive, and possibly unsuitable for their needs. Mortgage protection policies, which do not pay out immediately, cease payment after as little as twelve months, and disqualify many people who are self-employed or working on short-term contracts are a case in point.

Perhaps it would be better if the Government stopped equivocating over its long-term commitment to the National Health Service and made it clear just where it intends to withdraw, or to reduce the quality of service to the most rudimentary level.

The case for the Government to make some forms of insurance provisions, including minimum percentages of earnings to be contributed to pension plans, mandatory, in the same way that minimum motor insurance is mandatory, is looking stronger by the minute, although it may be something they would prefer to leave it to a Labour administration to introduce.

Individuals inevitably tend to postpone investments until they are convinced that prices are rising, by which time prices are looking expensive and set to fall. This has bedevilled the unit trust industry for years and has only been partly offset by Peps with long-term tax attractions.

The attractions of so-called guaranteed products, which protect capital against loss in return for a limited participation in investment gains, is a clear indication of the longing for certainty and security, and is something the majority of investment-based products cannot give. No amount of tax-sheltering can protect investment products against the twin ravages of inflation and market competition.

But at least there is no shortage of publicity, the media is picking on issues in need of debate, the Government is committed to strengthening the regulatory authorities, and the codes of practice established over the last decade are gradually raising the skills and standards of practitioners in the industry.

In some areas it has been a case of one step forward two steps backwards. Many cheerful purchasers of endowment mortgages and personal pensions have been horrified by revelations of the extent to which their investments have been ravaged by front-end commissions and charges, and have withdrawn from the market. But the long-term move to greater choice, clarity and access to information is highly desirable.

Government however could help by drawing up long-term plans quickly so that older investors are not tempted to delay decisions. And financial institutions could play a part by offering flexible products which could be bought now in the knowledge that they could be applied to a variety of future needs as they arise.