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Paul Lewis: ‘Advice’ monopoly killed the MAS and will harm savers

Paul Lewis

“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

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Comments

There are 39 comments at the moment, we would love to hear your opinion too.

  1. Questionable assumptions and poor examples.

    The ‘industry’ already has a monopoly on regulated advice because it’s restricted to those who are regulated. The calls were for making it clear to the general public. It’s important because they have recourse to the FOS and FSCS for regulated advice but not for Paul’s type. Why would you not want that to be clear?

    The example about a smoker’s annuity is just silly. Whether you label either statement as advice or guidance is irrelevant, it’s the content that matters and neither are regulated advice.

    The idea that advisers have the sort of influence Paul is suggesting is laughable when you looked how far they get with the things they consider really important.

    This article smacks of trying provoke a reaction rather than say anything of substance.

  2. “This article smacks of trying provoke a reaction rather than say anything of substance.”

    As usual…..

  3. I have some sympathy with your views Paul but we as IFAs have tried to protect the word advice because it has been abused so many times. I have seen lawyers, stockbrokers, accountants all abuse the system some intentionally – some accidentally. It seems everyone and their mother is an expert – even the bloke in the pub. It devalues what we do best.

    I think the government is right to talk of regulated advice. Afterall it is about protection under UK legislation and that is regulated – and we pay dearly for that privilege. If the word ‘guidance’ stop one person and makes them think twice then it has been worth it.

    Regarding the point about the annuities and smokers, many of our clients are surprised how we horse trade with annuity providers. There first offer of an enhanced rate is rarely their best offer. Only a professional IFA with experience knows that and it involves regulated advice.

  4. Paul your usual incisiveness and good sense seems to be absent here.

    Of course there is (and should be) a monopoly on advice.

    Advisers must be qualified. They are regulated and have to stand by that advice for evermore. Doctors have a medical monopoly, lawyers have a legal monopoly and accountants have an audit monopoly. All are qualified and regulated (yes advisers could well be qualified to Level 6, but at least Level 4 is a move in the right direction). Would you go to an unqualified lawyer, doctor or accountant?

    Then of course, the secret is in the word ‘advice’. Unfortunately, this is not yet fully adopted by the adviser community. But advice and product flogging are not the same thing. Your piece (which seems to be the general consensus) is that advice (or even guidance) has to lead to a product being purchased. Not so. What the client buys is advice. In effect, the product (if there is one) comes free.

    Just as a facile and very brief example. If someone asks for advice for the investment of (say) £100,000 and this is their total liquid asset. They have (say) a mortgage of £200,000. Arguably, advice here could well be: Reduce the mortgage by £75,000 and keep the remainder in cash for a rainy day (notwithstanding the low interest rates). No product (or indeed a minus product), but a fee is charged. Not what providers, fund managers and banks want to see, but is this such bad advice?

  5. First of all I’d like to say that I understand Paul’s frustration that his old employer has been scrapped and that any future revenue for him from this source has disappeared.

    I’m not really familiar with Paul’s work but am surprised at the simplistic/misleading views expressed in his article. Is he new to this subject?

    To do justice to my ‘beef’ I would like to go into much more detail but because I’m not a journalist (and I won’t ever try to give anyone that impression even though I am posting on Money Marketing) so I won’t be getting paid for this. It will have to be enough for you to know that I have over 27 years experience of giving face to face financial advice. Based on my experience, I think that he is very, very wrong!

    So , in a way, I am giving you guidance. I can give that to you quickly and it costs me only some of my lunch break. If you want a well thought out response which I prepare for you personally (probably following at least one detailed meeting) and in writing which can then be used against me if I am subsequently proved to be wrong (with no long stop!)……..well that is going to take alot more time. That will be ADVICE and for that I would need to charge a fee!

  6. Paul you seem to forget that it is the general public who get confused and if this can be simplified then it is only a good thing. You may well have given advice in the past and I agree with you that you have but it was not regulated advice. Do you really think the public, if they get advice should know whether or not it provides them with the protection of FOS and FSCS? Of course they should and righty so.
    For advisers it is also a very good thing too as it should now clearly show to what point we can take people, knowing where the line in the sand is drawn between guidance (an expression I despise) and advice.
    If I make a recommendation I fully understand that I have, from that point, taken on all the regulatory responsibilities and liabilities in doing so and will charge accordingly.
    Up to that point anything told or written to the client will not be advice. Subsequently I will not have the same risk or responsibilities so will charge less. MAS did little to help people with things that they could not already get help with.

    As for MAS, it was a parasitic quango run by “Civil Servants” who do not have a clue about the people that MAS said it was there to help and cared about them even less. Neither did they (current and previous) have a clue about effectively running an organisation. You only need look at the millions upon millions of pounds of levy payers money it wasted on “marketing” and how it was spent (Another classic example are those morons who approved the “Workie” Ad, obviously this was not MAS but it perfectly proves my point). We can only hope that the replacement bodies are run and staffed by people who actually know what they are doing. Please God do not let any of the “leaders” of MAS reappear or it is doomed before it starts.

    I would like to know Paul’s view on what he thinks the world of journalists would do if they were forced to fund millions to a body that did little other than to repeat what he and others in different journalistic fields were already doing. All because some bureaucratic buffoon had the idiotic idea that journalists, in the round (another phrase I despise) would benefit from said new organisation. Unfortunately said buffoons exist in their hoards in all walks of public life and actually believe the utter codswallop that emanate from their “Think Tanks”. I think there would be constant headlines in media lambasting said organisation until it too was sent into the abyss.
    As Grey Area says above I think that Paul’s intent was simply to get reaction but I for one am only to happy to rise to the bait.

  7. Silly article, very lazy! Ask a member of the public whether or not they would prefer their ‘advice’ to be from a source which is regulated and liable via FCA/FOS or from the pages of a newspaper, from a person who is not regulated and therefore not liable for their recommendation (other than through normal court process!). Only a fool would answer ‘whichever is cheaper!’

    If you back your confidence and knowledge, then just get properly qualified, get regulated and get liability insurance (and yes, that is where the cost is!). I would love to be in the position to dole out advice without any personal liability and therefore any overhead, I would do it for £20 a pop, but as we all know, that would be wrong!

    • So would I. I’d love to sit on a bar stool and pontificate for a round of drinks, but as I am qualified, in doing so I would risk my home and future unlike Paul.

  8. Paul. The MAS was an ill conceived idea in a market that was ill regulated.
    Whoever thought to put it together was not in the real world as regards financial advice.
    Advice should be regulated I agree but to fund from a regulated source an unregulated concept was and is ridiculous .
    Despite huge amounts of time and money being spent on trying to present the MAS as a real source of advice it was in reality no more than a stupid idea run by people who pontificated about ‘best’ advice but had no mechanism to implement the correct resource.
    Over paid and over whelmed by the reality that it was from the start a dead duck ,we had to sit and watch millions being spent with no body prepared to admit the impending failure.
    RDS is on the same slippery slope and we are due to see just what ‘impact ‘ it has had to the detriment of the whole Financial Services Industry.
    Least we are accused of saying ‘we told you so’ let’s just accept that the MAS should never have been allowed to sully the reputation of real advice.
    Any more white elephants you can think of supporting?

  9. Those best buy annuity tables assumed standard commercial commission terms and for anyone with a pot above £25k, they would usually be better using an adviser on a fixed fee. Plus, with health questionnaires typically filled in better by IFAs and the improved commercial terms IFAs can get (especially on enhanced annuities), then using an adviser results in a better outcome than using a best buy table under guidence

  10. If someone stops me in the street and asks me how to get to ZXY store and I tell him then that is factual information (aka “Guidance”). The art of advice is to ascertain what he is after, delve into my years of experience and recommend that he go instead to ABC store. Oh and by the way if he goes to ABC and is dissatisfied he can then claim compensation for his time and inconvenience. Paul does a very good job of providing factual information from which people can make informed decisions. However if they act on that information and if it subsequently goes wrong they do not have any recourse for compensation or are unable to complain. Simples…..

  11. Happy to rise to the bait also 😉

    In Paul’s example around someone looking for an annuity and his “sound advice” to get smokers rates. The difference would be that if that same person went to a qualified and regulated adviser, the adviser would question whether an annuity is even appropriate, not tell them to toddle off and get smokers rates thank you very much. What is the persons more general health like, would he wish for his family to get better death benefits should they be considering an investment linked annuity or drawdown rather than a standard annuity? Perhaps if Paul was qualified to give advice he would have considered the full facts and given actual advice, rather than tell the client what they want to hear because it is easier to do so than to do the job properly and dig deeper to find out what they actually need, rather than what they want based on their own limited knowledge of the options available.

    Paul states the following “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.” But he then goes on to give an example of someone who wants an annuity and he tells them to go and get smokers rates. Sorry Paul but if they FCA or FOS were vetting your wonderful advice then they would deem you as having recommended a certain type of product, namely an annuity, and if the client later complained you would definitely lose that complaint as you have not considered whether the alternatives may be better options.

  12. ….and the Government still don’t get it. Let’s just launch another(two!) services paid for by the Financial Services Industry, have them arms-length like the FCA and then look surprised when the people who fund them get hot under the collar about their failings. Just a bizarre approach.

    If the Government want to undermine regulated advice with this type of guidance service, then for goodness sake pay for it from the public purse, rather than making the victim hand over silver to the executioner.

  13. Paul

    What you describe as having given in your videos is guidance, not advice. Advice is telling someone what you think they should do HAVING TAKEN ACCOUNT OF THEIR SITUATION AND CIRCUMSTANCES. If I consult a medical professional I expect he might give me options for treating an ailment – that’s guidance and stating facts. However, I would want him to advise me what he feels I should do as he knows my personal situation and circumstances.

    You said it yourself “Advice says what you should do”, but that wasn’t what was happening in your videos; you weren’t taking responsibility for a person’s actions taken as a result of your videos.

    Quite often a client will say “What would you do if you were me”. That’s asking for advice, not asking simply for a set of options.

  14. I have worked in the advice sector, for Citizens Advice and others, for over 30 years. I have never given regulated financial advice. I do not propose to stop saying that I give advice.

    • If we had proper regulation you would be hauled over the coals. No PI, no FCA Authority, no contribution to the FSCS and presumably no relevant qualifications and no liability for the so called advice that you give.

      What a lot to be proud of. What’s the day job?

      • I am not giving advice about financial products. I am giving advice about benefits, housing, employment and other areas. Why should I call it something else?

        • Well in that case you are in the wrong debate. You are in a completely different category. Although I have no knowledge of what makes you qualified to advise on these topics and unlike other professionals you don’t have to stand by that advice, or stand risk the risk of being sued if your advice is not to the entire satisfaction to those you advise. Even the members of the press are governed by the Press Complains Commission.

  15. I like it when Paul makes comments. There is an old saying, ” If people think that you are an idiot, best not to open your mouth and say things that confirm it!” Just when my week seems long and tiresome, along comes Paul to brighten it up by saying things that make me laugh out loud. Unauthorised, unqualified, nincompoop!

  16. Why do we give this man airtime ?? He is bitter and twisted because he once lost money on an Endowment – his words not mine. He regularly bites the hands that feed him his fees, and we allow him to get away with it. Does anyone remember his speech ( ?? ) at the PFS Conference ?. I rest my case.

    • Nigel Herrick is simply wrong. I never lost money on an endowment. May have made rather less than expected! But I didn’t complain. And if I am bitter and twisted it is not that which caused it!! As for biting the hand that feeds me. If I am paid to make a speech I may well criticise the people who paid me. A big difference between journalists and financial advisers!

      • Customers/clients pay us fees Paul and we do indeed point out the rights and wrongs of their actions or intended actions as a part of any form of financial advisory process. Did you maybe mean that we receive our funding from provider commissions and it is them who we dare not criticise? If so, barring non-investment sales, that argument went out of the window in January 2013, so reload and aim again, with fresh ammunition!

  17. @Gareth Morgan
    That’s fine and if it makes you feel better about yourself to say you give advice keep going. But it’s not about you is it? When it comes to talking about regulated advice, either directly or indirectly, it is in the interests of the recipient to understand what they are getting. Using similar or the same word(s) to mean two fundamentally different things (regulated and unregulated advice) is not helpful to consumers.

    It’s not about the semantics or whether an individual wants to lay claim to a particular term, it’s about whether the consumer understands what they are getting and the extent to which they can rely on it.

  18. Stuart Gregory 7th April 2016 at 4:02 pm

    Let me put it this way – the ability to call their work/guidance ‘advice’ should be limited to those who have studied, continue to show professional tested ability, pay regulatory costs and most importantly, are HELD LIABLE for their actions. This cannot be said for journalists/CAB/Money Saving websites who can (and do) influence the public’s understanding and behaviour. Take Martin Lewis’ comments in the past about ‘free’ mortgage advice, issued with the disclaimer ‘Our site is all about saving money’…regardless of the quality of the advice?!

  19. Lewis is clearly upset that there is a legal restriction on him being able to call himself an “adviser” just because he bears no responsibility or comeback if his “advice” leads to one of his listeners suffering a financial loss. He can say whatever comes into his head and hide behind the shield of journalistic privilege if anyone calls him out when he gets it wrong.

    Some advisers may profess envy for that position, but if we all looked into our hearts I don’t think any of us really covet the right to talk rubbish.

    He thinks that an industry formed of a hugely diverse variance of one-man bands, national firms and all points in between, all totally independent (many under a very strict regulatory definition of the word), is a “monopoly”. Clueless. Lewis doesn’t pause to think one iota about what a monopoly is and whether the millions of regulated advice firms conform to that definition. Because to him it’s not about truth, it’s about what Stephen Colbert famously called “truthiness”. Truthiness is not about reality but about what gets you the most attention. If people ring up to agree with you, that proves you must be right. If people ring up to /disagree/ with you, that proves you are carrying out a noble crusade against vested interests.

  20. Perhaps we’re missing a third word here – education. Guidance would perhaps be “it’s important to plan for your income in retirement”, education would be “if you are a smoker looking for a regular predictable income over the long term then an annuity based on smoker rates should be considered” and advice should be “having considered your personal circumstances, needs and desires I recommend ABC strategy, the most suitable provider in this instance being XYZ co.”

    Had MAS been MES the distinction would have been clear and its role – largely dealing with the financially illiterate – would have complemented that of the regulated professional adviser market perfectly.

    • Christopher Lee 8th April 2016 at 6:59 pm

      Do remember that the MAS was originally called the CFEB – the Consumer Finance Education Body, which was probably a better title all round, albeit a mouthfull

  21. Generally I like what Paul Lewis has to say and the financial advice/planning profession should remember that it (increasingly & professionally) deals with people of significant wealth leaving the majority of the public to work things out themselves, and commentators like Paul, and organisations like MAS, TPAS and CAB are available to everyone.

    I worked closely with MAS in recent years and found the people there to be good people trying to work more closely with the profession and to make a difference to consumers, saddled with a reputation from mis-management of the organisation in its early years.

    In Harry’s comment above he makes a great point regarding the move to providing advice rather than selling products. The regulators definition of advice still primarily concerns products and that’s not going to change anytime soon. As a profession, our target should be to get across to consumers that we have moved to providing and charging for advice rather than selling and charging for products, and worry less about who else is using the word advice in their title. It is vital that consumers understand the protections that regulated advice brings – any clarity the consultation can bring is a bonus.

  22. Adrian Philips 7th April 2016 at 4:46 pm

    I don’t have a problem with what you are saying Paul. I actually agree with the gist of what you are saying.

    We are too hung up over the word “advice” and in my opinion we need to be a lot more relaxed about it.

    What we do is professional, researched and pertinent to our clients needs. The client values it and pays for it.

    I have said here before, the MAS was serving people who would probably not use an IFA and if they did approach we probably wouldn’t want them.

  23. Problem is people want advice, I.e being told what to do). But they can not/will not pay for it.

  24. Richard Wright 7th April 2016 at 7:38 pm

    Only two idiots would champion this worthless bottomless money pit of an organisation. One is the author of this “article” the other also writes on these pages!

  25. Dick Sprinkler 8th April 2016 at 8:17 am

    I cant take this bloke seriously !

  26. Debating the semantics of the word “advice” is so last year darlings, so let’s not get too hot under our collars; the FAMR will make this topic unequivocal for all consumers as all regulated individuals will soon be giving a “personal recommendation” to clients. That means we can leave Mr Lewis to carry on providing advice.

  27. Richard Wright 8th April 2016 at 8:08 pm

    But your not qualified

  28. Paul, you’re 68 this year. My GUIDANCE is that working too hard for too long may be dangerous to the health and rationality of some. My ADVICE to you is to stop confusing the public in pursuit of your own agenda. Bl**dy journalists! (Why do Money Marketing publish this sort of rubbish? It’s becoming The Sun of the financial press) Sorry for my language. Rant over.

  29. My lord………for a clever individual Mr Lewis has an extremely poor grasp of the situation.

    Imagine you find yourself in a situation where in order to do your job you need to sit through hours and hours of tests to prove that you know what you are talking about. In addition, every year you need to prove that you have continued to study and learn and that your knowledge hasn’t gone to pot. Yet despite this level of commitment to your job you need to take out insurance to make sure that should you get something wrong your clients are covered, not a problem providing the insurance is affordable……………………oh! Despite all of this we’re still not done, we need to pay the powers that be in order for them to officially designate us ‘able to do our job’. Once we have jumped through all these hoops we can confidently tell our clients that we will give them advice.

    Now imagine that someone doesn’t bother to jump through all of those hoops and decides that they are going call themselves Advice ltd. Would you, as a seasoned hoop jumper, think “that’s not quite right”?

    Now imagine that you are paying for your mate to set up ‘Advice ltd’ and he isn’t being as clear as he should with his clients about how many hoops he jumped through or what it means for them that he didn’t bother jumping through said hoops.

    Would you kick up a fuss?

    We didn’t create the symantics but we reserve the right to make sure that they are observed!

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