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Guide and seek

A couple of weeks ago, a firm I have dealt with before decided that it wanted to offer its staff a series of free “educational lectures”, in company time, on a wide range of one-off topics.

I was the person brought in to talk about money and was subsequently told the attendance at this session was greater than for almost all the others put together.

Why bring this up now? Well, last Friday, I chaired a session at a one-day conference on the retail distribution review organised by the Personal Finance Society. Speakers included Fay Goddard, shortly to become PFS chief executive, as well as others from the ABI, the consumer group Which? and the PFS itself.

Goddard brought up the issue of the Thoresen review of generic financial advice, published in March. She made the point that the Aegon chief executive’s vision of high quality, affor-dable money advice for those most at risk from the conseq-uences of poor financial decision-making was key to proposals in the FSA’s interim paper on the RDR.

In other words, one cannot be separated from the other. If a much clearer division between sales and advice, as envisaged in the interim report, is to become the way forward, it needs a properly funded and organised generic advice service to underpin it.

Yet, as Fay pointed out, everything seems to have gone very quiet on the money guidance front in recent weeks, leading to the suspicion that the Govern-ment, and perhaps the indus-try too, would rather see this particular set of proposals being quietly shelved.

Perhaps we should not be too surprised at this potential outcome. The Thoresen review argues that there are quantifiable net benefits for users of £15bn between now and 2060. In addition, both the industry and the Government stand to gain between £5bn and £6bn each from better-informed consumers.

But all this comes at a cost. Thoresen estimates that the likely bill over the same period will be in the range of £800m-£1.6bn, to be split evenly between both parties.

This is a very large chunk of money and involves an open-ended financial commitment that neither side would be too keen to make, especially if – as I suspect is likely – the real cost of providing money guidance is much greater than the amounts envisaged by Thoresen.

Moreover, as I pointed out at the time the Thoresen report was published, there is an inter-relationship between product and non-product-related advice. A significant part of any money saved by a household will come by people switching from uncompetitive products to better ones.

If the consequence of widely available financial advice – even of the generic variety – is that consumers begin to shop around far more for better products, there are likely to be a lot of providers asking why they are funding a service that is losing them business.

Even so, Goddard is absolutely right to point out that the choice between sales and advice only works if consumers who see a salesperson as distinct from an IFA are able to make well informed decisions.

The other key issue that still needs to be determined is precisely who will be taking forward this strategy. For Thoresen, that body is the FSA. After all, as the regulator itself argues, the FSA has a statutory duty to promote public awareness of the financial system. The precise amount that the FSA currently spends on this role is hard to quantify.

It is undeniable that the FSA has tried to educate and inform through a combination of printed literature, workplace education and a multitude of websites, including comparison charts. But there is nothing in its published accounts that allows us to know what its budget is in this area or how effective its spending is.

Meanwhile, its Financial Capability Working Group – stuffed full of all sorts of worthies – attempts to co-ordinate the activities of a disparate number of organisations and businesses, all of whom are working on different initiatives aimed at the public.

The reality, however, is that notwithstanding its so-called statutory duty, the FSA is not the body we need to make the qualitative leap forward as far as the provision of effective money guidance on the ground is concerned.

Partly, it is the fact that the experience of last year’s debacle in relation to Northern Rock shows it has not fully mastered its role as a prudential regulator.

But in any case, the work necessary to create advice centres in hundreds of towns and cities across the UK as well as over the phone and the internet is a major task that can only be carried through by an independent body with its own budget and lines of responsibility, directly accountable to Parliament for this specific area of work.

It can be done but only by a body that is transparent and fully focused on one task alone. Whether the Government understands this remains to be seen.

Nic Cicutti can be contacted at


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