Editorial: Has the government mis-sold its stakeholder “success”?

How do you think the FSA would respond if a financial services firm said something was a success when it had in fact been a failure? Could this be considered misleading under the terms of financial promotion rules?

The question has to be asked as the government’s latest campaign to promote stakeholder products says launch and take-up of financial services stakeholder products has been a “success”.

The industry’s response has been to laugh at such a suggestion, accompanied by cries of anguish as it has been arguing for four years the concept and promotion of such offerings is flawed and sales have been extremely low.And yet the government persists in suggesting stakeholder has been a success.

According to the Collins English Dictionary, the definition of success is:

The first question is, which is the correct definition in this case? And secondly, has stakeholder products led to the attainment of consumer wealth?

You could argue consumers have attained some wealth through the launch of child trust funds (CTF), but this cannot really be attributed to the success of stakeholder products. The government says over half of CTFs so far taken up have been placed in stakeholder options, yet recent figures suggest otherwise. So which is it?

Delusional seems to be the only conclusion we can reach about the government’s view of stakeholder products. “Delusion” is defined as a mistaken or misleading opinion, idea, belief.

So you could argue the government is either unwittingly deluded about the “success” of stakeholder and simply mistaken – not a fair argument given the ABI has recently pointed out poor sales of stakeholder – or it is knowingly delusional and is in fact acting against the rules it charges the financial services regulator with upholding.

In short, it is knowingly misleading the public and has launched this public campaign because stakeholder products have not been a success.

It seems double standards are being applied which financial firms would never get away with: its insistence stakeholder is a success is a misleading act which surely under the terms of FSA rules could be considered mis-selling?

The ABI’s recent update on new business figures suggests “success” is perhaps not the correct term to use.A press release dated 25th August – just last month – entitled Steady progress for long-term savings, but Stakeholder products fail to take off suggested the government’s range of stakeholder products “show disappointingly low sales of £92m”.

In fact, one ABI executive stated “the stakeholder range of savings products has so far failed to make any appreciable impact, and there is much still to be done in order to make the stakeholder concept work”.

In reality, the government has not “mis-sold” the stakeholder concept because let's face it, we're not buying it. There is not a single person in the industry who actually believes stakeholder has been a success. You can't mis-sell if no-one's buying.

But if there were a company making the statement, it could be questioned under the Advertising Standards Authority and the FSA’s financial promotion rules. All the industry has to do now is find a way to point out knowingly taking such actions in the financial services would usually be followed by a regulatory fine.

If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email julie.henderson@incisivemedia.com.