The Money Advice Service faces a fundamental structural overhaul after a Treasury-commissioned report recommended slashing its £43m “money advice” budget in half.
In a report published today, former Consumer Focus chair Christine Farnish calls on the Government to redefine the MAS’ role based around four main activities.
Firstly, Farnish says the MAS should establish a budget for grants and commissioning to encourage providers to develop products that fill gaps or provide innovative ways of educating and informing consumers, citing examples of apps or “edutainment” tools.
Secondly, the report argues the MAS should establish a free financial helpline service to provide independent answers to queries about financial products and services. This would be coordinated with the FCA, and Farnish suggests the regulator requires firms to promote the service, for example on bank statements.
Thirdly, MAS should invest in promoting financial education in schools, coordinating and quality-assuring existing schemes, as well as bringing resources together for teachers and awarding prize funds to leading and innovative schemes.
Finally, it should also work with the industry to cut jargon, developing consumer-friendly quality criteria and investigating the feasibility of a kite-marking regime.
Farnish adds such a restructure would likely take up to three years, and would need to be monitored by a statutory framework to hold MAS to account, and clarify its remit.
She says: “The MAS debt advice budget should be kept under review as demand and supply continue to change.
“Under the new model, we believe the budget of MAS’ consumer finance education remit could roughty halve from £43m at present, while serving consumer needs more closely.
“This is a high-level estimate and MAS, the FCA and the Treasury will want to review this as part of the transition.”
The report also sheds doubt on MAS’ expectation that 7 to 10 million actions will be taken by consumers as a result of visiting its website this year.
Farnish says: “We consider this to be subject to considerable uncertainty and likely to be an overestimate.” She adds consumers are able to access good quality information elsewhere from trusted sources, albeit without this being run the by Government.
“Given this, we consider it not to be good value for MAS to seek to duplicate other provision. Rather, MAS should be focusing on improving the quality of the broad range of other information and guidance provision.”
On debt advice, Farnish says the MAS has been “largely successful”. She recommends the organisation takes on a stronger coordination role, chairing a new debt advice steering group, bringing together senior representatives from major creditor firms with chief executives from Citizens Advice, Money Advice Trust and Step Change.
This group could foster agreement on triage processes to ensure customers get cost-effective debt advice, better early identification of customers with debt problems, common processes and approaches to help drive efficiency and a common framework for management information reporting.
Responding to the report, MAS chief executive Caroline Rookes says: “We currently help thousands of people every day to take action to manage their money better and in contemplating changes, we must not let those consumers down.
“So we will now work closely with the FCA, the financial services industry, consumer groups, the voluntary sector and other experts, to assess if the recommendations could be implemented in a way that would best benefit consumers and enhance the financial capability of the UK.”
The MAS will now complete its own investigation into the conclusions of the Farnish report, presenting its findings to the Government in Autumn.
The Government will then publish its own conclusions and plans for any changes to MAS by the end of 2015.
In March 2012, the Treasury select sub-committee announced plans to probe the effectiveness of the MAS and review the salaries of its senior management.
The MPs’ inquiry into the MAS, published in December 2013, concluded the service was “not fit for purpose” and in need of a “radical overhaul”.
Farnish was subsequently appointed by the Treasury to lead a review of the MAS in May last year.