George Osborne’s decision to close the Money Advice Service brings to an end a sorry six years during which hundreds of millions of pounds of cash has been wasted on the failed body.
The Chancellor revealed in the Budget the MAS will be axed as part of a restructure of financial guidance that will see the creation of two bodies responsible for pensions and money support, respectively.
The pensions body will combine The Pensions Advisory Service, Pension Wise and elements of the MAS in a new pension guidance service, with a key objective to make sure consumers can get all their pension questions answered in one place.
Following the closure of the MAS, the Treasury will also introduce a new money guidance body, with a specific remit to identify gaps in the guidance market.
The new service will then commission providers to fill these gaps to ensure consumers can access debt advice and money guidance.
But was Osborne right to ditch the MAS just as it was embarking on a significant turnaround strategy? And will the hated adviser levy simply be replaced with another charge for a different guidance quango?
Lack of clarity
In the Budget consultation documents, the Treasury says it expects that by combining services it will be able to reduce the overall budget for pension guidance.
Funding arrangements will be formalised by the FCA and The Pensions Regulator.
The changes are in consultation until 8 June, with the organisations expected to be in place by April 2018.
TPAS chief executive Michelle Cracknell says it has yet to be decided who will lead the new pension guidance organisation, or whether the new body will also assume Citizens Advice’s role as a face-to-face provider of guidance.
She says: “Over the next two years the Department for Work and Pensions is going to work out the what and how, but we have a really good relationship with them and they have always made sure that we have the ability to deliver the services to meet our objectives. We are looking forward to all of this change, but there’s a big job to be done.”
Osborne’s decision brings to an end six years of existence for the MAS, first launched in 2010 as the Consumer Financial Education Body.
Since then, it has levied a total of £397.2m on financial services firms.
Although the FCA was unable to estimate precisely how much of this sum has been paid by financial advisers, almost 10 per cent, or £32.3m, has been contributed by firms with advice permissions.
Over that time, it has been beset with controversy and has seen its remit steadily decline since October 2014, when the Treasury decided the MAS’ role in Pension Wise would be limited to providing expertise behind the scenes.
And then, almost exactly a year ago, an independent review led by Christine Farnish called for a dramatic overhaul of the business, with its budget slashed and its offerings refocused on debt support.
Farnish says: “The plan outlined in the Budget will allow for a more effective service to be provided to consumers at a much lower cost instead of this more fragmented landscape, particularly for consumers coming towards retirement, for whom it can be especially confusing.”
The MAS was launched in the aftermath of a report led by Otto Thoresen, now chairman of Nest.
Thoresen says his initial vision centred on a guidance service that also worked as a co-ordinator with other organisations.
He says: “The concept was always about gap filling – the construct discussed today sounds like that. But once the MAS was set up it had a broader remit.”
Financial Inclusion Centre director and former FCA board member Mick McAteer adds: “It was badly conceived with far too much emphasis on financial education and that was always going to be a waste of time.
“We know that passive education efforts like producing information on pamphlets and poster – and even to an extent websites – just don’t work.”
Fairer Finance founder James Daley agrees: “I don’t think it was ever quite put together in the right way. Setting up something that relies on people coming to approach it was never going to work.
“We have quite a head in the sand approach to money and if you are going to improve financial capability you have to grab consumers, and force them to pay attention.
“But they never really got to grips with the problem, and now the MAS dies having failed to address the main challenge that it was created to deal with.”
Dawn of justice
The MAS’ short history has been littered with problems, from using the word ‘advice’ in the name – a term the Treasury now admits was “misleading” – to chief executive Caroline Rookes’ questioning the ethics of advisers at a Labour party conference.
The organisation also found itself in hot water with advisers when its TV advertising campaign claimed the MAS offered free, unbiased, independent advice.
Informed Choice managing director Martin Bamford says: “This has been a long time coming and if you waste other people’s money for so many years, you get shut down. This is a great day for justice.
“My major issue has always been that spending has always been primarily focused on the wrong things, like vanity advertising. It should have been used to help the vulnerable but it was squandered on trying to help build a brand.
“The MAS was empire building rather than helping the people who need it most.”
Page Russell director Tim Page adds: “Our firms have not received one iota of benefit from the MAS. And I don’t think the MAS has helped the general public either – you get a general feeling that those who have used MAS say ‘oh is that it?’
“The problem is it does not tell people what to do or help them to transact, so they are stuck between a rock and a hard place. The industry didn’t want to pay for it and people using it have unrealistic expectations. The kindest thing to do is the kill it and hand the money back to advisers.”
And Apfa director general Chris Hannant says the trade body has “never seen the need for MAS and TPAS and Pension Wise to be doing the same thing in the same area.”
He adds: “What we need in this area is simplification and clarification. We have always said we don’t want to see MAS duplicating what is already available elsewhere, and to that extent, this seems like a logical step towards that.”
Nonetheless, some have questioned the timing of the decision, with Rookes still in the process of reforming the organisation in the aftermath of the Farnish report.
Conservative MP and Treasury Committee member Mark Garnier says: “Had this happened three ago after the Committee’s report then I probably would have thought it was fair enough, and certainly the previous chairman and chief executive did not have the confidence of the committee.
“But under Caroline Rookes they had started to move into some interesting areas, and started to find some reasons to stay alive.
“After that there was always going to be a question about whether it should be anything more than a finger pointing people in the direction of other services.”
Moneysavingexpert founder Martin Lewis, who once described the MAS as “crap” during a TSC hearing, adds: “I would have previously said I wouldn’t blink if given the chance to get rid of MAS, but if I were in charge now I would give it 18 months because it is finally pointing in the right direction.”
And the man who first recommended its creation says the MAS would likely have ended up in a similar format to that proposed by the Chancellor this week.
Since completing his report in 2008, Thoresen says there has been a “revolution” in the amount of information available online, while additional bodies have also been created to help steer customers through the pension freedoms agenda.
Faced with such change, MAS was always going to have to evolve from its original form, he says.
“There have been a lot of changes but the work that’s been done to change the MAS over the last few years has been positive.
“These recommendations are an evolution MAS would have got to over time. All the analysis suggests even before freedom and choice reforms the need for helping people was still there.”
If I were going to scrap the Money Advice Service, the time to do it was three years ago. We have finally got to a position where we know what the MAS should be, and at last it was moving in the right direction.
What the MAS has done in the past has been awful. It spent years being a brand-building, rent seeking exercise, duplicating services already in existence.
For the adviser community there is no doubt there has been an abominable and disgusting waste of their money that has been spent on this.
And when I spoke to the Treasury select committee in 2012, I said it was crap, and I would be embarrassed to have it on my website.
But what it is doing now is looking at gap provision, and that is finally the right direction for an organisation that is moving forward.
If you had asked the people paying for it if they would support an organisation set up to help with education and support financial capability, there would have been a lot less complaints about it in the first place.
I still do not think the MAS moved quickly enough to turn things around, and things like the adverts and sponsored tweets should have been curtailed immediately.
But we need some of that financial capability support, and this plan was moving the MAS towards that.
I would have previously said I would not blink if given the chance to get rid of MAS, but if I were in charge now I would give it 18 months because it is finally pointing in the right direction.
Now we need to ask who is going to take up the mantle of financial capability and I am not quite sure who that is.
Martin Lewis is founder of Moneysavingexpert
Tom Kean, director, Thameside Financial Planning
Ding dong the witch is dead. This was a dreadful incarnation of trying to help people. It was flawed from outset, including the name, was run by lesser civil servants and was paid for by the wrong people.
It was the classic case of spending other people’s money on something nobody actually wanted. A laudable idea but completely flawed.
Alan Lakey, partner, Highclere Financial Services partner
I am glad the MAS is gone. It has been an enormously expensive quango, but I do not believe I have ever heard anybody say anything good about it. It has been a total waste of the industry’s money.
My only fear is that there will be a new similarly flawed initiative further down the line that is also funded by the industry.
2008 – Former ABI director general Otto Thoresen publishes his report into public financial guidance, and recommends regulated firms contribute towards the cost of a money guidance service
April 2010 – Consumer Financial Education Body is established by the Financial Services Act
April 2011 – Organisation rebrands and the Money Advice Service is launched
June 2011 – MAS slammed over TV ad with the strapline – “our advice is independent and unbiased. Oh, and it is free. How is that for a breath of fresh air?”
June 2014 – Treasury announces Christine Farnish will lead a review of MAS
September 2014 – At the Labour party conference MAS chief executive Caroline Rookes said she was “personally” worried about the ethics of regulated advisers
December 2014 – Farnish review recommends halving MAS headcount and cutting budget by up to 38 per cent
April 2015 – MAS drops TV adverts as marketing budget slashed
April 2015 – Pension Wise launched
March 2016 – Osborne announces MAS will be scrapped