Last month, the Government announced the launch of its feasibility study into the provision of generic financial advice, which I have been asked to lead and I am delighted there has been such a positive response to this initiative.
There has been significant support from many organisations in the industry, including long-term savings providers, banks and advisers, as well as companies not usually associated with personal finance or long-term savings.
Consumer groups and the voluntary sector have put their weight behind the pro-ject and so have the Chartered Insurance Institute and the Personal Finance Society.
I was particularly pleased that the two major IFA organisations, IFA Promotion and the Association of Independent Financial Advisers, both welcome the initiative and recognise the potential benefits. This is a great start to a challenging and worthwhile project.
As an industry, we have a responsibility to work to improve financial capability. There are many people who need help with simple financial decisions, such as assist-ance with basic savings, debt and benefit entitlements.
Much of the work of the service will aim to cater for the needs of very low-earners and the financially excluded. A successful service that engages people and brings them to the market with confidence will have dividends for financial services businesses.
The Government is clear about the potential benefits of generic financial advice. The feasibility study will look at how it may be made to work in practice, to provide a service that is effective and valuable for the public. We intend to involve senior people from the public and private sectors, with direct experience of business, customer service and financial advice to act as a reference group.
There are a considerable number of stakeholders in this project and I intend to meet and consult with a broad range of players.
An effective generic advice service would aim to complement the existing IFA market and provide a first stepping stone for people as they think about their personal financial situation.
The issue we face is that not enough people are saving enough or taking out enough protection at a time when longevity trends suggest they should be saving more.
Many people are not even aware that they need to save more to ensure a comfortable, let alone prosperous retirement. There are still significant proportions of the population not currently served by our industry.
Although new business levels for the industry rose sharply last year, there are still too many people who are outside the savings net.
For lots of people, personal finance is an issue that they find confusing and as a result they try to avoid thinking about it altogether, putting off important decisions, or making the wrong choices.
By the time they seek independent financial advice, it can sometimes be too late for an IFA to recommend a course of action which will get them to where they need to be financially.
We need to help people gain the confidence to think positively about taking responsibility for their financial futures. An information and guidance service can play a big part in achieving this.
Of course, there are already some important projects taking place in this area, which will be valuable to the development of the study, such as the work of the Resolution Foundation. Another example is Citizens Advice. It has responded to the growing number of financial queries it receives from people by running a pilot generic advice scheme in selected offices which has proved extremely successful. We can learn a lot from the experience.
Generic advice is not the only measure of improving the UK’s financial capability. Much work is under way in schools, with personal finance increasingly part of the educational agenda. This augurs well for the future. In the meantime, though, people in their 30s, 40s and 50s also need guidance and information about basic financial issues, and need help in making decisions – and we need to take account of that.
With pension reform on the horizon, there will be increased focus on pension decision-making. The workplace may provide an effective forum for delivery of generic advice but that is just one of a number of areas that we will be looking into.
We are just at the beginning of this feasibility study and the potential design and shape of this system will be determined in the months ahead.
We are very clear, however, that the end-result will aim to complement the existing market of independent financial advisers, providing accessible, general information to help people determine their options.
I strongly believe that having the opportunity to access information and guidance on basic financial matters will help people get to grips with their finances and act positively about the future. This provides an excellent opportunity that stands to benefit everyone.