“Who gives a_____?” Sorry. I’ll rephrase that for a family audience. “Who gives advice?” That is the question the Government is struggling with. And indeed what is advice? And how can we fill the advice gap without actually giving people, er, advice to fill it?
In future Citizens Advice, The Pensions Advisory Service, and the Money Advice Service (note the names) will no longer give advice about money. They will give “guidance”. Never mind that people want advice. The forces of MAS destruction are so powerful they have invaded the land of advice and planted their flag there so that only those with QCF level 4 or higher can give anything called advice when it relates to money.
So what is advice? It is helpfully defined by the Government in its consultation proposals on public financial guidance. In future “advice” will mean “regulated financial advice”. The paper, written in a language resembling English, does quite a bit of defining things in terms of themselves.
As part of the process, the MAS – whose name “has always been misleading” because the advice it gives does not fit the new definition – will be scrapped and its brand dissolved.
The Government has decided the MAS was so expensive it should be replaced by not one but two new bodies. First, a money guidance body run by the weapon of MAS destruction itself, the Treasury. It will not have a brand, perhaps not even a name, as its function is to be “largely invisible”. It will work “in partnership” with a pensions guidance body run by the Department for Work and Pensions. Both will be “at arms’ length” from Government. But I guess that will not mean they can say to the Government “talk to the hand cos the face ain’t listening”. Both will be paid for by a levy on the financial services industry.
The document also defines the term “money guidance”. It now means “guidance on general money matters”. Good to get that cleared up.
The paper – a consultation about having a consultation – marks the beginning of the end of the MAS. Since it began in April 2011 it has been subject to a blistering attack. Its first boss Tony Hobman left shortly after his £350,000 pay packet was revealed and its £1.4m TV adverts promoting its “free, unbiased, and independent advice” stuck in the craw of many advisers who paid about 10 per cent of the total cost which hit more than £80m in 2014/15.
The criticism of the MAS has seldom been about the quality of what it does – giving advice on things that, as I have pointed out here before, most advisers do not advise on like budgeting, benefits, and debt.
Let me declare an interest. I made some videos for the MAS about choosing an annuity. The scripts, with a few minor tweaks, are what MAS staff wrote. They give excellent advice to those considering if an annuity was for them and what to consider. They lead to objective best buy tables which can be used without signing up for lifelong sales material as happens on commercial comparison sites. Of course the MAS paid me for my work, hence the declaration of interest. But I would not have done it if I was unhappy with the product. It is excellent.
The real objection to the MAS, and what has finally done for it, was its name. It was that word “advice”. Of course, that is what it did. It gave advice. That is what my videos do. But oh my goodness how the advice world hated it for using that term. Even though it was in fact clear, fair, and not misleading to call what it did advice.
As I said in Money Marketing more than a year ago, the financial services industry has long been trying to impose a monopoly on the word “advice'” Advice is what all of us give every day when people come up to us and say “how do I get to Railway Cuttings?” or “what repairs does my car need?” Never, in 30 years of financial journalism, has anyone asked me for “guidance”. And never have I given it. I give advice. Not regulated advice. I do not recommend products. I do not say you should put your money into a balanced portfolio of equities. Or ask people their risk appetite. But then I do not charge them 1 per cent of their life savings. Every year.
Guidance is a mealy-mouthed half-truth of a word. It has no place in the context of helping people with money questions. What people want is advice. Advice says what you should do. Guidance says what you may or may not want to do.
Somebody is looking for an annuity. They smoke.
Advice: Make sure you get the higher annuity rate that many firms give to smokers.
Guidance: In some circumstances people with health and lifestyle issues can get an enhanced annuity.
No contest. But no more. The Government will end the service which people can use and rely on for excellent advice on budgeting, debt, borrowing, retirement, wills, employment rights, benefits, insurance, annuities, saving, disability, estate agents, sending money abroad, buying a car, caring, etc. Instead people will get wishy-washy, “on the one hand on the other hand” guidance – or “signposting” to use the meaningless modern term.
Most of the financial needs we have are outside the scope of regulation and product recommendations. And beyond the competence of most “advisers”. But good and useful advice on all those things will now be thrown out so that the financial services industry can be given a monopoly on the word advice.
It is the public who will be the poorer. Literally.
Paul Lewis is a freelance journalist and presenter of BBC Radio 4’s ‘Money Box’ programme. You can follow him on Twitter @paullewismoney