The weaknesses of the Money Advice Service
Like other advisers, I am paying, without option, towards this years £43.7m money advisory service funding. Legislation actually provides for a variety of possible funding sources, including public funds, consumer credit licences and a levy on financial services firms regulated by the FSA.
Thus far, however, regulated firms have been the only source of funding and it appears this sole source of revenue will continue. As the FSA’s 2011/12 business plan stated: “Last year, we were funded entirely through the levy and we anticipate that all the activities covered by this business plan will also be funded from that source.”
As with other forms of taxation, I am denied any control over the use of my funds, so an examination of the money advisory service’s aims, ambitions and layout of the website is the least I can undertake. Like the FSA, it is burdened with statutory objectives, although in this instance just the two - to enhance the understanding and knowledge of members of the public of financial matters (including the UK financial system), and to enhance the ability of members of the public to manage their own affairs.
The service has the brave ambition of changing consumer behaviour, a task that has proved far beyond the capabilities of successive Governments and regulators. Subtle adjustments, such as internet searching - egged on by the deluge of adverts for aggregator sites - have been achieved but wholesale changes to attitudes have not been successful.
Now, advice for consumers is always welcome, although in this instance the website merely supplies information, thereby making, as many have noted, a mockery of the appellation. The site provides extremely precise descriptions of the various products and this aspect cannot be faulted, but this is not the case when it comes to accessing the comparative tables. Those tainted PPI plans have been included but there is no place for the superior income protection product or for critical-illness cover.
The weakness of MAS is it is totally reliant on the willingness of the consumer to participate. In this regard, it is no different to the typical advisory model where the majority of advisers react to a consumer’s approach. Consumers willing to make the effort to access the MAS are likely to also make the effort to speak to a financial adviser. It is the slothful majority that neither is currently reaching.
Hark back some 20 years and we find the industrial branch salesforces proving adept at finding these financial virgins and turning them on to financial matters and to the concept of advice.
There is a ladder of knowledge when the consumer meets and trusts a sales representative. Having accepted the mantle of personal responsibility, the consumer is sufficiently open-minded to react to a sensible conversation and move on to the next level of accessing independent advice. Since the demise of industrial branch salesforces, with the removal of savings plans and pensions that included worthwhile commission, the initial introduction to these virgin consumers has been lost. The irresponsible, the unknowledgeable and the lazy now have no initial conduit available and the MAS will not be changing that.
We need to accept the Government/Treasury/FSA do not believe independent financial advice can or should be made available to the wider population. Any organisation that is serious about financial awareness and education for consumers should be pointing out independent financial advice offers the most trustworthy and balanced opportunity for a good outcome.
Alan Lakey is partner at Highclere Financial Services<