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MAS reform plans could see adviser costs fall 93%

Money Advice Service

Plans to change the way firms are levied to fund the Money Advice Service could see advisers’ total MAS levies fall dramatically from £4.6m to £300,000.

The FSA has published a consultation today which proposes a new way of allocating the costs of the MAS’s “money advice” resources to FSA fee blocks. It proposes to allocate costs based on its data of how consumers use the MAS website, telephone advice line and face-to-face advice service.

If approved, the move would see the total cost for firms in the A13 fee block, which covers many advisers, fall a massive 93 per cent from £4.6m in 2012/13 to £300,000. The proportion of the MAS budget allocated to advisers would go from 9.9 per cent to 0.7 per cent, based on data which suggests 2.6 per cent of consumers who use the MAS do so for financial advice.

Under the proposals mortgage lenders would see their costs for funding the MAS soar by 1309 per cent, going from £1.1m to £15.5m. This is based on data showing 15 per cent of MAS users accessing information on homes and mortgages, a further 11.5 per cent accessing the mortgage calculator, and 3.3 per cent accessing mortgage comparison tables.

Firms in the A18 fee block, which includes mortgage brokers, will see their fees fall from £1.6m to £300,000.

The MAS has proposed a total budget of £78.3m for 2013/14, with £43.8m allocated to money advice and £34.5m for debt advice. The way debt advice costs are levied on banks, building societies and lenders is not changing.

The current fee block system for funding for MAS was brought in on a temporary basis when the service was launched in April 2011. The funding review was delayed until last May, when the FSA said the MAS would review its funding model for 2014/15. This review has now been brought forward to 2013/14.

If the new allocation method is agreed, 2013/14 MAS levies will be based on accumulated MAS data for six months. MAS money advice costs for 2014/15 will then be based on MAS data for the whole of 2013.

The FSA says: “The proposed allocation method gives a clearer link between how consumers use the money advice service provided by the MAS and which firms pay for it. The link is not perfect but it replaces an allocation method that has no such relationship.”

MAS director of service delivery and marketing communications Karen Broughton says: “We believe this is a fairer way of funding the MAS. We are keen to hear what the industry’s views are on the consultation.

“The most significant shift with this is the cost falls in line with customer demand. Where we are today is slightly outdated, and this needs to be revisited. It is more of a evidence-based approach, and tries to apply more logic to the fee structure which probably does not exist in the current model.”

Apfa policy director Chris Hannant says: “We welcome the FSA’s recognition that there needs to be a better relationship between how consumers use MAS services and which firms pay for it. 

“We think this represents a step in the right direction. However, we should not ignore the fact the overall cost of regulation for advisers has increased. The FSA needs to keep a handle on the cumulative effects of significant fee rises on the advice profession and guarantee that fees are proportionate, fair, and do not reduce vital access to financial advice.”

The consultation closes on 22 February.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Mixed feelings on this one.

    Great to hear the cost to advisers of funding a service to give ‘advice’ to people is reducing. However, I will continue to shout at the tele when the adverts come on, especially as it’s promoted as an alternative to talking professional advice and appears to be paid for by the Government.

    Shame to hear that only 2.6% of interest is for financial advice when that should be people’s core need with everything else coming from that.

    Finally the mortgage calculator, that would have been pretty simple to code up, is going to cost the lenders a fortune in fees!

  2. The FSA keeps banging on about how much they tell consumers that advice has never been free. Maybe they should see just how useful their service is by having the public “pay per visit”. Even if it is only £2 per visit. If they can deliver the kind of service they proport that consumer want then the consumer will happily pay a meagre £2 for something they perceive as giving value. MAS will get fees in the region of £38M according to their own target figures they want to achieve and they can use this any way they want. The FSA keep telling us that consumers WILL pay fees if they are getting a service they want – same should apply to MAS and if they dont get the fees then one can only assume that the service is therefore not value therfore should be scrapped. Lets try that for a funding method and see how long they last before being closed. Do you think the quangoites would go with that? Let me think…. eh No as it woud shouw just how woeful the whole thing over MAS is and that being the case why maintain it now? quod erat demonstrandum to all those in the FSA.

  3. Sorry don’t get it ?
    1/ People use MAS as an alternative to seeking paid financial advice. In many cases it will be the competition to our services. For me, we should get a discount for every person that uses the site.

    2/ Financial advisers…stop using the site! Your nosing around is probably responsible for 90% of the advice queries.

    3/ When someone uses the mortgage advice area, they go on to buy a mortgage product; so I understand why Lenders pay. But people seeking free financial advice on MAS, don’t then come and buy my product; so why do I pay at all? I am 100% existing client and referrals, so where’s my gain?
    I don’t get it, please educate me.

  4. Well said Marty. Advice is free but only if someone else is paying for it. I too shouted at the telly the other day. “Set up by Government”. My wife told me to calm down and said “but it said it was paid for by the Government”. I said exactly. No-one else can get away with deliberately misleading weasel words … except the quangocrats themselves. It is a deliberate deception. Finally .. why should mortgage brokers pay a penny ? We have to pay for our mortgage sourcing systems. Why should we pay for a direct competitir to be made available to our potential customers ? Vein throbbing again – must stop ….

  5. Get rid of MAS entirely, its NOT the government’s job to meddle in providing financial advice and I don’t see why the cash strapped sector with which it is effectively competing should pay £millions to fund it. A cynic might say it’s another job creation scheme for overpaid bureaucrats. It’s complete madness.

  6. Whilst I understand the sentiment of those critical if MAS and was one of those weho complained to advertising standards anout tge TV avderts nit being clear fair & not misleading. MAS levy for a small firm is only about £10 or £20 per annum.

  7. You are right Phil, but it is the concept of the whole thing that is bizarre. It failed when it was Moneymadeclear (a contradiction because it was so unclear) and all I can say is that it a useful tool that I use on occasion as it has some quite detailed information (that most of the public would find too complex to be of value). I guess it is worth a pound a month to me from that angle, but pretty useless for its intended purpose.

  8. As Tom Hanks said in the film Saving private Ryan” it’s FUBAR

    Most of you will know what that means

    Those who don’t need to get with the program.

    The RDR is designed to rid the regulator of the majority of those pesky IFAs who keep criticising it.

    The only conclusion one can draw that doesn’t sound paranoid (but it doesn’t mean THEY aren’t out to get us) is that the people responsible for dreaming this mess up, did it consciously and deliberately to damage UK financial services and allow foreign firms to move in.

    Naw! Me Paranoid ? Never!

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