With the highest possible costs only giving £15.60 per person, industry is in doubt whether generic advice system can deliver sufficient benefits
Several groups have questioned the estimated costs of Otto Thoresen's generic advice service, with even the highest predictions providing under £16 per person.
The Aegon chief executive published an interim review last week proposing that the financial services industry and Government should each pay half the costs of a free generic advice service for consumers.
Thoresen estimates the service would cost between £40m and £80m a year.
With a budget of £78m a year, the report estimates five million consumers could be served at a cost of £15.60 each.
The figure would depend on costs being kept to a minimum through clever use of the internet, including social networking sites, which would be the method of contact for 30% of the time.
Face-to-face advice would make up 20% of contact, and telephone calls would make up 50%.
But several industry commentators doubt the costings of the advice service are accurate. They also dispute whether financial services firms should pick up the tab for a scheme that could be detrimental to their business.
John Lawson, head of pension policy at Standard Life, said the £15.60 estimate per customer is unrealistic because advice would need to be primarily face to face and by phone to deal with complex matters such as pensions, tax and investment quickly.
He said: "How can you deliver a service for that cost? These subjects would require longer, more in-depth phone calls than debt counselling."
The report said calls to the National Debtline average 16 minutes and cost £24 per customer.
Lawson added: "We know how much these services cost because we use phone advice at Standard Life. It costs between £30 and £50 per customer to dispense advice this way."
Overall, the review suggests the financial services industry would benefit from a populace that is increasingly confident in money matters.
"If the overall level of financial capability were higher, in the long run the financial services industry would have a broader base of consumers with which to transact," it said.
But Lawson said these confident clients could now self-advise rather than consulting an IFA.
"I am not saying the whole service is a waste of time. It is a good thing overall and there is clearly a need for it, but it should be funded by taxpayers' money."
"Employers could also be obliged to contribute to the service on behalf of their employees, which would in effect redistribute taxes already paid by businesses."
Elsewhere, Chris Cummings, director-general of Aifa, is broadly supportive of the scheme. "Because of Thoresen's work, better-informed clients will still seek out financial advice. This will lead to a better-educated consumer with a greater understanding of financial services," he added.
However, Aifa feels that funding for the scheme should not be restricted to FSA-regulated firms, but should include consumer credit and debt-management companies that potentially stand to benefit from it.
Cummings said: "Our members already pay a lot in regulatory fees, and any additional contribution must be kept to an absolute minimum and be thoroughly cost-justified."
He emphasised the need for the advice to be clearly defined as guidance and to be linked to sales in any way.
Cummings added: "Overall, there must be clear water between this financial guidance service and any product sale. If the work simply leads to another sales channel it will fail, and consumers will once again be let down."
Thoresen will make final recommendations to the Government in the New Year.
These will take into account findings from generic advice pilots currently taking place in the North West, London and South Staffordshire.