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Aifa questions MAS funding model and accountability

The Association of Independent Financial Advisers has raised concerns about the Money Advice Service’s funding model and its accountability.

Aifa has today submitted evidence to the Treasury Select Committee’s inquiry into the Money Advice Service.

In its submission, Aifa questions whether the evidence used to demonstrate MAS’s effectiveness is appropriate.

Last month, the TSC announced it would look into the salaries paid to MAS staff and the effectiveness of its service. MAS chief executive Tony Hobman’s £350,000 salary package has previously been criticised by the business innovation and skills select committee who called on the Government to raise the issue with the FSA as a matter of urgency.

Aifa policy director Chris Hannant says: “We have yet to see evidence that MAS is meeting its objectives, and we are unconvinced that a predominantly online service will achieve the necessary behaviour change in the public’s approach to personal finance.

 “We do not think the funding model for MAS is appropriate.  They have a blank cheque from the financial services sector without any accountability to it. We also need to see evidence that demonstrates the service’s value. For this we need to assess MAS’s effectiveness against indicators such as the narrowing of the savings, pension and protection gaps.”

Aifa also argues that MAS should provide information but not regulated advice.

Hannant says: “We thoroughly endorse MAS’ current role in signposting consumers to regulated financial advice. But it is important that MAS remains a source of information only and does not creep into the regulated advice sector.” 

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.


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Duncan Carter 5th June 2012 at 3:42 pm

    Perhaps if MAS was self funding it might be more effective.

    At the end of the day we all know that people don’t value what they don’t pay for and even the FSA explains that advice is not free.

    On £250k p.a. plus tips old Hobman’s on real winner here, why doesn’t MAS explain who’s paying for it and what exactly it does?

  2. Julian Stevens 6th June 2012 at 10:04 am

    Isn’t the FSA is required by the very terms of its constitution to undertake industry consultation before embarking on any new regulatory initiative? That having asked, experience has shown us that even when the FSA does deign to go through the motions of consultation, it makes not the slightest difference to a course of action that’s already been decided upon, often on the basis of an expensive review already commissioned to a third party.

    Also, the FSA refuses to publish for all to see and to debate, in open forum, any of the feedback submitted. So much for the FSA being “an open and transparent regulator”, as it claims on its website to be. The FSA’s consultations are just a hollow, token sham and, as far as the MAS is concerned, the FSA appears not to have bothered even to go through the motions, secure in the knowledge that however loudly those forced to pay for its latest idea may complain, there’s little, if anything, they can actually do to change it. Arrogance of the most brazen and unacceptable type.

    Apart from the relatively rare cases where people have been (yes, badly) advised to increase their mortgage to raise money for investment or to invest money instead of paying down a mortgage, the national problem of excessive unsecured debt simply isn’t one of our making. So why should we have to pay for debt counselling? The primary objective of the financial services industry is to help people to accumulate and to protect wealth. If any sector should have to pay for debt counselling, it’s the credit and store card companies, not us. They’re the bodies that grant people excessive unsecured loans.

    Then again, if unsecured borrowing was properly regulated, principally by limiting (to no more than 3 months nett income) the total amount of debt that people are allowed to run up on cards, the problem of excessive personal debt wouldn’t be anything like as bad as it is. Counselling is tackling the symptoms instead of the causes which, to my way of thinking, is grossly inefficient and wasteful ~ of OPM, as usual.

    And what about all these rogue short term loan companies charging interest at rates of 1% or more per day? Shouldn’t the government be doing something about them?

    If we add to those issues the FSA’s established practice of dumping on the IFA sector the costs of mopping up the fall-out from every provider failure, it’s truly amazing to hear Hector Sants claiming before the TSC that the FSA has no prejudicial agenda against small IFA’s. All the evidence simply doesn’t support such a claim.

    And finally, if the Business, Innovation and Skills Committee is going to chuck in its two pennyworth, then why isn’t it citing the Statutory Code of Practice For Regulators, created by its predecessor, the Department For Business Enterprise & Regulatory Reform, the foreward to which was penned by Pat McFadden, himself now a member of the TSC? I quote:-

    “The Regulators’ Compliance Code is a central part of the Government’s better regulation agenda. Its aim is to embed a risk-based, proportionate and targeted approach to regulatory
    inspection and enforcement among the regulators it applies to.

    Our expectation is that as regulators integrate the Code’s standards into their regulatory culture and processes, they will become more efficient and effective in their work. They will be able to use their resources in a way that gets the most value out of the effort that they make, whilst delivering significant benefits to low risk and compliant businesses through better-focused inspection activity, increased use of advice for businesses, and lower compliance costs.”

    What a load of empty tosh that was, despite it supposedly being Statute.

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