Advisers are calling on the Treasury select sub-committee to extend its inquiry into the Money Advice Service to include its controversial TV advert and consider whether the service should exist at all.
Last week, the sub-committee announced it will conduct an inquiry and published its terms of reference. It will look at the effectiveness of the MAS’s expenditure on staff and the appropriateness of the service being funded by a levy on financial services firms.
The MAS, which was formerly the Consumer Financial Education Body, launched in April 2011 and is funded by a statutory industry levy.
As well as providing generic financial advice, the MAS was this year given responsibility for the co-ordination of debt advice. Its budget for 2012/13 doubled from £44m in 2011/ 12 to £87m, to take account of its new remit.
In March, Money Marketing revealed MAS research into its financial healthcheck service found 300 out of 1,000 users surveyed did not remember completing the healthcheck and another 371 failed to do anything different as a result.
Advisers have welcomed the sub-committee’s move but say the inquiry should go further.
Facts and Figures managing director Simon Webster says: “The committee must question the future of the service full stop. It is not necessary and it never was. Its ’advice’ label undermines IFAs.”
Anand Associates managing director Bhupinder Anand says: “I do not think the industry should be paying for the MAS. Ploughing the funding into infrastructure that already exists, like the Citizen’s Advice Bureau, would be more efficient.”
In September, the Advertising Standards Authority rejected complaints from 77 advisers over the MAS’s controversial TV ad which claimed it offers free, independent and unbiased advice.
Derbyshire Booth Financial Management managing director Greg Heath says: “The committee should definitely look at this. MAS is not free, we pay for it, and it does not offer regulated advice.”
In March, the business innovation and skills select committee called on the Government to raise the issue of MAS chief executive Tony Hobman’s £350,000 salary package with the FSA as a matter of urgency.
The committee said Hobman’s remuneration could be seen as “extravagant”, adding it “does not sit easily” in an organisation given the task of helping those in debt. Hobman told the committee his salary means he is “hugely incentivised” in the role.
In 2011/12, the MAS spent £13.5m of its £43.7m budget on staffing costs. It has allocated £7m of its £87m budget for 2012/13 for staff.
Anand says: “We are supposed to be keeping costs to clients down while Tony Hobman is earning a huge salary. It is ridiculous and unjustifiable.”
Last month, Treasury financial secretary Mark Hoban rejected calls to amend the Financial Services Bill to force the MAS to focus on providing “targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation”.
Heath and Anand agree this is where the MAS should focus its efforts. Heath says: “The RDR will leave a big advice gap. The MAS should work to fill that and boost financial education in schools.”
Aifa policy director Chris Hannant says: “The Treasury select committee inquiry into the Money Advice Service will be welcomed by advisers. We have continually expressed concerns about the way the service operates, its cost to the industry and the effectiveness of what it does.
“It is right there should be a thorough review of its operations and value. The cost of regulation for financial firms in general is spiralling. Given the difficult financial environment advisers are operating in, we must question the costs of the service to the industry.”
The scope of the inquiry
The Treasury sub-committee’s inquiry will investigate:
- Whether the MAS is meeting its core statutory objectives of enhancing the understanding and knowledge of members of the public of financial matters and improving the ability of members of the public to manage their own financial affairs.
- Whether these are the right objectives for the MAS to have.
- The effectiveness of the MAS’s internal administration and expenditure on staff and other resources.
- How appropriate it is that the service is funded by the financial services industry.
- Whether the accountability mechanisms in place for the MAS are adequate and how the effectiveness of the service can be assessed.
- To what extent the services provided by the MAS are also provided by other organisations and how they compare.
- Whether the MAS is reaching its target audience, whether any groups are unable to access its services and who is worst affected by a lack of knowledge of financial matters.
- Whether the MAS has a greater role in financial education in schools.
The story of the Money Advice Service
April 4, 2011: The Consumer Financial Education Body is rebranded and launched as the Money Advice Service.
June 2, 2011: It emerges that the MAS plans to spend £4.6m of its £43.7m 2011/12 budget on communications and marketing.
June 8, 2011: MAS launches its free online financial healthcheck.
June 2011: MAS launches advert claiming it offers free, independent, unbiased advice.
July 19, 2011: Department for Business Innovation and Skills consults on the MAS taking a central role in coordinating debt advice.
July 2011: Advisers complain to the Advertising Standards Authority, which sparks an inquiry into MAS’s controversial TV advert.
September 14, 2011: ASA rejects 77 complaints about MAS’s TV advert.
November 4, 2011: Money Marketing reveals up to three-quarters of MAS staff have been put into redundancy consultation.
November 10, 2011: Treasury financial secretary Mark Hoban writes to MAS over concerns it could drop its work on financial education if widespread redundancies are made.
November 24, 2011: MAS refuses to disclose how much it spends on redundancy packages, directors’ remuneration and overseas trips for senior management in response to a freedom of information request submitted by Money Marketing.
November 25, 2011: Money Marketing reveals MAS spent £250,000 rebranding its website.
December 1, 2011: MAS policy lead Francis McGee says MAS is “moving very clearly from just doing information and education towards doing advice-type activity”.
December 9, 2011: MAS says it plans to spend £20m on brand awareness and marketing in 2012/13.
December 13, 2011: MAS chief executive Tony Hobman tells the business, innovation and skill committee that his £350,000 remuneration package means he is “hugely incentivised” in the role.
January 21, 2012: Parliamentary question from shadow Treasury financial secretary Chris Leslie reveals Hobman and four senior managers shared a £100,000 bonus pot for 2010/11.
February 2, 2012: FSA confirms the MAS budget will double to £87m for 2012/13 to take account of its new remit co-ordinating debt advice.
February 24, 2012: MAS defends relationship with advice contracting company A4e, after the police launched an investigation into allegations of fraud at the firm.
March 8, 2012: Money Marketing reveals MAS research into its financial healthchecks finds 300 out of 1,000 people surveyed did not remember taking the healthcheck while 371 failed to do anything different as a result.
March 9, 2012: BIS select committee calls on Government to raise issue of MAS chief executive Tony Hobman’s £350,000 remuneration package.
March 29, 2012: Money Marketing reveals Treasury sub-committee is planning an inquiry into MAS.
April 23, 2012: Labour fails in its attempt to amend the Financial Services Bill to force the MAS to focus on providing “targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation”.
May 2, 2012: Treasury sub-committee announce terms of reference for inquiry