The coalition Government will set up a free national financial advice service, funded in full by the industry in the form of a social responsibility levy.
The Conservatives proposed the measure, which it estimated would cost £50m a year, as part of a range of economic commitments in February. Business Secretary Vince Cable has campaigned for a network of free advice in the past.
The Government says the service will be an extension of Labour’s money guidance and the FSA’s money made clear schemes.
Labour committed to launching money guidance by 2011 with a £20m roll-out cost. This was to be shared between industry and the Government, with the Government earmarking money through reclaiming dormant accounts to help fund the project.
A Treasury spokesman says: “We will look at money guidance and money made clear and see how we can improve and adapt those schemes. The service is likely the be an extension of these existing programmes.”
When the Tories announced plans for the £50m advice service, a party spokeswoman said the service would offer consumers impartial advice on money matters via face-to-face sessions, telephone advice and online advice. She added: “It is about encouraging a culture where people proactively seek financial advice. We think this would work quite well alongside IFA advice.”
Baronworth director Colin Jackson says: “The idea is first class but then so many are until it comes time to cost them. Providing face-to-face sessions is going to cost a fortune if the Government is planning to have offices and staff around the country. We need to know who is going to deliver the advice, what qualifications they will have and what standard the advice will be.”
User comments from our website. Join the debate at www.moneymarketing.co.uk
Martin Bamford: This is not a threat to IFAs, unless of course your business model is to say ’yes’ to every prospective clients, cross-subsidise massively the cost of your services and act as if you are providing ’free’ advice. RDR critics should welcome this announcement as it will help to deal with one of their main objections, that some socio-economic groups will lose access to advice.
Mark Penston: We have all been wondering how the masses will be dealt with in the fee-based world. This could be the answer, although there are lots of questions. Let’s see how it pans out but a good first step.
Tricia Campbell: I hope the people giving this advice will have to sit the same exams we have been sitting for the past number of years. I think a lot of thought needs to go into this or the country could end up in a worse mess than it is already.
Sarah Jordon: I used to have time to give free advice when the industry was commission-based and my rich clients subsidised my poor or charity clients. I now restrict my pro-bono work to very limited pockets of time due to the increasing pressure of exams, increased regulatory and business costs and a downward pressure on income.
Paul Greek: Why should we be expected to have to pay for a service that is no benefit to us? If the Government wants to introduce free advice, then let it be funded by the general tax system as a social cost. This idea would be setting a dangerous precedent.
Alan Lakey: Whatever party is in power, they all believe that you can bleed the industry because there is no obvious financial impact on consumers and because the industry is seen as fat and easy to drain. The problem is not the Government, the FSA or the FOS but the all pervasive mindset that the industry is and should be able to fund all manner of harebrained schemes and regulatory devices.
Baron Bolligrew: I accept that someone has to deal with clients who cannot afford to pay but where will the distinction come? Where will the parameters be set? What qualifications will these ’free’ advisers have? What would motivate an IFA to work for this ’free’ service?
Ian McKenna: If this helps address consumers who cannot afford IFA services could it not be a good thing? IFAs could point such cases in the direction of the national service with a clear conscience. Will this not become a national debt counselling service?
John Hooper: I was hopeful that the IFA community or any other professional organisations would be fully consulted on any new measures. Ask the professionals who have the experience.”