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Mick McAteer: The UK needs a non-profit national advice network

Mick McAteer 06

Good financial advice is critical to promoting financial resilience and security amongst households – particularly underserved lower to medium income households which are the focus of our work at the Financial Inclusion Centre.

But claims that overregulation has created an ‘advice gap’ are wrong – or disingenuous.

The real reasons are growing numbers of consumers simply cannot afford to save and invest, or pay for for-profit advice; many consumers are ‘underserved’ because the industry is still too inefficient to meet their needs; and some firms lack the confidence to advise consumers without a ‘belt and braces’ approach to complying with regulations.

In other words, it’s all about the economics of access and distribution and business cultures, not overregulation.

So what can be done?

Firstly, the industry needs to be more efficient and bring down unit costs so it can reach more consumers.

Secondly, if it would help, the FCA should clarify the meaning of rules. But this should not extend to a ‘safe harbour’. Reducing consumer protection would just enable the industry to continue to serve those on medium to higher incomes but transfer the risk of misselling to consumers and undermine confidence in financial services, which is just being rebuilt after a litany of damaging scandals.

Well run firms with a strong internal consumer culture are less likely to design and sell toxic products, and fall foul of regulation and redress claims. But I’m still struck by how some in the financial services industry think of compliance and risk management as a burden. In other consumer industries, these functions are an integral part of safety and quality control and seen as pre-requisites for maintaining trust.

Thirdly, we should remove the confusion around the definition of advice and advisers. There is no need for spurious distinctions. Either advice is given or it isn’t, and advisers are either independent or they are sales agents.

Fourthly, there is also significant scope for technology to improve the efficiency of the supply chain and help advisers (and consumers) better understand attitudes to risk, expose biases and preferences and so on. But we do not need to reduce regulations to encourage these innovations.

Each of those interventions will contribute to closing the advice gap. But we still need a non-profit national financial advice network to provide advice and information to consumers who are not commercially viable for the for-profit financial services industry.

In some ways, this would be an advice equivalent of Nest – the collective pension scheme which has been so successful in providing a good value pension for many and real market discipline into the pensions industry. This network would complement, not replace, commercial advisers.

We would need clear boundaries and agreed protocols for governing the relationship between regulated commercial advice and non-profit advice.

There is a cost involved, of course. If a national financial advice network is to work, this would involve some form of cross subsidy either from the public purse or from the wider financial services industry.

But the cost of not creating a viable advice alternative will be greater for excluded households and wider society in the long-term.

Mick McAteer is director at the Financial Inclusion Centre

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Comments

There are 37 comments at the moment, we would love to hear your opinion too.

  1. And for non-profit read another quango financed by the industry.

    Can someone tell me what experience this self appointed expert has at running a financial services business?

    Also non-profit doesn’t mean low salaries for those at the top of the tree it just means it doesn’t have the aim of making a profit!

  2. Hear hear! But we also need a national network which covers the silos around financial services, tax and welfare benefits. Without advice that can provide a bottom-line figure, avoiding the current silos with their separate expertise and outputs, people still won’t understand the impact of their decisions.

  3. “advisers are either independent or they are sales agents” – you know it’s 2016, right? You’d better tell the FCA that restricted advisers are just flogging products. Absolute foolish nonsense and a slur on thousands of outstanding restricted advisers in the marketplace. I know a large number of restricted advisers, and a large number of independent. I’d count them on an equal footing in terms of quality of service and client outcomes.

    As to the rest of the article, I applaud the sentiment, but the reality is that it would be a very poor relation to actual financial advice and may well lead to worse consumer outcomes as people gravitate towards the cheaper option instead of the best value option for them. It may well lead to more people getting at least some advice, but would inevitably lead a lot who currently get “for profit” advice (which I find to be an insulting term and focussing on the cost to the client instead of the myriad benefits they receive) going down the cheaper route and receiving a worse service.

  4. I did think about a detailed critique here.

    For example, he provides no reason for his statement “claims that overregulation has created an ‘advice gap’ are wrong – or disingenuous”. Indeed, the either/or nature of it suggests that he isn’t concerned with thinking about it, he just wants to dismiss it.

    He then tells us that “The real reasons are growing numbers of consumers simply cannot afford to…pay for for-profit advice” without explaining how that is unrelated to the restricted supply of financial advisers, or the costs of delivery faced by those who remain. The answer is of course because of regulation: but such economic analysis is contrary to his communist dogma, so he ignores it.

    He then goes on to the usual nonsense that the solution for consumers who are not commercially viable is for such provision to be collectivised.

    We are yet to nationalise food retail in this country to cater for those for whom commercial provision would be unviable. We tend instead to give them vouchers (or indeed cash) to buy food.

    I appreciate that a few thousand extremists have now taken over the Labour Party. But this is no reason for a Trade paper to indulge those hard-line communists who think trade and profit are dirty words – unless of course they’re done under the guise of charitable status so they can build their empires without paying the huge tax burden faced by ordinary people.

    But to be honest, I’m tired of these people. So lets just tell them to get back to Russia.

  5. I have a question.
    If there were to be ‘a non-profit national financial advice network to provide advice and information to consumers who are not commercially viable for the for-profit financial services industry’ why should only THOSE consumers access it?
    Why wouldn’t the consumers who ARE commercially viable to the ‘for-profit’ sector also want to trot (no pun intended – see later) along to sign up for some advice – which would no doubt be cheaper than their current profit-based adviser?

    That sounds a lot like a cry of ‘nationalise financial advice’.

    Now, there might be an argument for that (and, if there is, I am sure the Rt Hon Mr Corbyn will soon be airing it) but, if that’s where you’re heading Mick, then do just say so and we can bring the debate into the open

  6. Like the Money Advice Service, you mean?

    There is currently a Rolex gap in the market. Many people desire a Rolex watch but do not have enough money to buy one. Does this mean the UK needs a non-for-profit Rolex dealer?

    • And here, ladies and gentlemen, endeth today’s lesson. I’ll take a not-for-profit villa in Monaco please. What’s that? It’s £100,000 instead of the £3.5M suddenly? Gosh!

  7. We could have a National Wealth Service modelled on the NHS. Count me in for the final salary pension scheme.

  8. Non profit always sounds warm and cosy until you look at the salaries being paid. Our lords and masters in E14 are employed in a non-profit organisation but boy do they have some fat pay cheques and benefit packages. Non profit nonetheless but many of us may not think great value for money.

    Oh and for those of us old enough, Equitable Life sales personnel (sorry advisers) didn’t receive commission. They were proud of the fact and understandably shouted it from the rooftops – but wow their basic salaries they received were miles above those of their competitors and were based on hitting targets. All smoke and mirrors.

    And Ivor makes a great point. If its such a good deal for the non-profit sector it will probably be great value for the rest too!

  9. I thought that the FSCS levy together with FCA and the PI Insurers were trying hard to put in place a not for profit financial advice industry already, just my humble opinion obviously!

  10. There is one already Mick, no need to reinvent the wheel – it’s called the Money Advice Service and CAB. People on lower incomes do not need full financial advice/planning, but most just need information and some guidance which MAS is intended to deliver.

    So your great idea is to have yet another body: a new national Financial Advice network to be funded by the “wider financial services industry”? Yet more costs to be added to the already significant regulatory costs. Great idea, pat yourself on the back.

    In my opinion, we lack good financial journalists in the UK who don’t make up rubbish stories. We need ones who actually understand the industry and isn’t there to make headlines to earn a profit. Applying Mick’s logic here, the answer would be to nationalise financial journalism and make it not-for-profit I guess…

  11. The ‘ Financial Inclusion Centre’ is a left wing political think tank. Money Marketing, please explain why anything this man says is relevant to financial planning professionals ?

  12. What an absolute load of Tosh -im still laughing my socks off -Non profit national financial advice network? The mans a fool !

  13. What a 42 carat plonker he really is. What planet is he from and why does anyone with an ounce of common sense give him and his lot any column inches at all?

  14. We already have a non profit national advice network – I think they are called IFAs?

  15. The trouble with ‘not for profits’ Mick is that they tend to be ‘for very high salaries’. Have you checked lately how much the top bods at Which? are paid?

  16. My dear departed mother in law finally asked me for advice when she finally retired some fifteen years ago.
    Over the years she had invested in several poor value insurance based savings plans peddled by commission hungry salesmen from the likes of Wesleyan, Brittanic, Pearl and Refuge.
    Over the years they had knocked on her door, increased premiums, sold savings plans where a pension would have been more appropriate.
    All in all they had committed numerous cardinal sins.
    However they had gone to her and encouraged her to put away affordable amounts on a monthly basis.
    Margaret accrued in excess of £80,000.
    Would she have sought out advice from a not for profit advice provider?
    Would she hell and it’s about time regulators and commentators realised the very simple fact that certain products and services need to be sold.

  17. Well said Mark.

    I commented the other day when Corbyn waqs accusing us of being rip off merchants that he’d like to nationalise us, et eh voila!

  18. John Reilly and a couple of others have put their finger on it. Oxfam and Save the Children are not for profit, as are several other charities I could mention, but they do pay some pretty juicy stipends top their big bananas.

    Indeed I could argue that I operated a not for profit organisation for years. I just ensured my takings soaked up what was left – hey presto – no profit.

    Mick old chap, my I volunteer to be part of this new for profit organisation. A six igure salary and a final salary pension scheme is all that I require.

  19. Trevor Harrington 19th January 2016 at 5:45 pm

    The man simply has the wrong letter in front of his surname – quite obviously it should be an R rather than an M …..
    Just pulling your leg Mick … which I assume is what you are doing also …

  20. We already have the MAS to cater for just this group, the LNW.

  21. Better get a straightjacket…

  22. Very little has worked, regulatory initiative-wise since April 29 1988, and this will be another clever idea by a committee-sitting theorist.

    Don’t we all wish for highly paid sinecures where we can tell the masses what to do whilst they fund our pontifications?

  23. “The ‘ Financial Inclusion Centre’ is a left wing political think tank.”

    That makes it sound more than it really is. The Financial Inclusion Centre is in reality Mick McAteer’s very badly made WordPress blog. Go to http://inclusioncentre.co.uk/ and you’ll see what I mean, it hasn’t even got its homepage properly set up. Why Money Marketing felt that his views needed to be appreciated by the national independent advice industry is beyond me.

    The only proper job McAteer has attempted in his life was to found the Hackney Credit Union. It went bust, after loaning money to people on benefits who could never pay it back. Still, you couldn’t argue they weren’t “financially inclusive”. http://hackneycitizen.co.uk/2010/09/05/questions-asked-over-hackney-credit-union-collapse/

  24. Okay, Mick.

    If you think it is such a good idea, you set it up and run it.

    Don’t worry about ensuring it is not for profit. The FCA, FOS, FSCS and your PI insurers will sort that part out for you.

  25. So when will Mick be re-mortgaging his house to set up this new national not for profit network? Oh what was that Mick, you’re just the ideas man, you need others to provide the funds, to set it up and run it……

  26. No Mick that’s the last thing the industry needs and it certainly doesn’t need another theory from an ‘industry expert’.

    What it actually needs is de-regulation.

  27. We know the FCA are considering a return to commission , which i welcome as it gives the client freedom of choice…. but returning to a network model …you are having a laugh. The network model broke 10 years ago ( if it ever worked)

  28. Years ago I worked for a not for profit organisation which included providing Independent Financial Advice. As much as I am a great believer in the mutual sector, thinking that “not for profit” will solve all ills is, to put it mildy, optimistic.

  29. I have just googled Mr McAteer…………hehehehehe…… Can’t hehehe …….stop hehehe……laughing …….hehehehehe…… I thank you Mr McAteer for bringing some joy on a day that began rather dull !

  30. Articles like this are not good for my blood pressure. I just don’t know where to start. When did it become acceptable to spout utter claptrap as if it was accepted fact and I wonder how many advisers the Financial Inclusion Centre included in their research or consultation before putting this together? My guess is zero or their input was just plain ignored.

  31. peter mulholland 21st January 2016 at 7:59 am

    I agree with him I worked for two not for profit( mutuals). It was easily the best money earner in the industry Sadly they are closed now so yep bring me back pleeeease hehe

  32. “Secondly, if it would help, the FCA should clarify the meaning of rules.” I totally agree on that point. It’s almost unbelievable in this day and age that we are merely provided with regulatory ‘guidance’ which is often laughable in its inadequacy. “It’s not our job to tell you what to do.” Well then,maybe it’s time it was?

  33. Would you care to explain to me Mick why profit is a dirty word? I am all for a massive public financial education programme, however if you want people like me to provide the expertise to impart that knowledge and understanding, that it’s taken me night on two decades to accumulate, that puts my knowledge in this field with that of a medical consultant, why is it that you think that I shouldn’t be encouraged by profit? Or is it that you think I should be paid say £150k a year, no matter how much work i do, or how much value i add?

    Profit comes from hard work, innovation, new ideas etc, it comes from creating an incentive to do it better, to do it more efficiently, which is why I and several others are in the process of setting up a new advice business to do things differently, more efficiently, whilsy providing nothing but outstanding service and value for our clients.

    Yet you seem to be of the opinion that i should just hand over my knowledge, experience and skills for next to nothing?

    I’d love to get my idea of creating engaging financial education classes set up in all secondary schools, colleges, universities and further education establishments off the ground, I’d love the idea of saving the country and the public vast amounts of money by increasing their knowledge, whilst also getting them far more engaged with their money and the adviser community.

    But I don’t think it unreasonable that if i were to save the country and public billions, then i’d expect to be paid appropriately, i.e I’d expect to make a healthy profit.

    Everyone is selfish to a greater or lesser degree, all the time you try to ignore that basic human trait, you are doomed to fail.

    Your’s is an idea that sounds great in practice, all lovely, warm and wooly, but because it denies basic human nature it will never work.

  34. There are a few aspects of this article with which I agree such as clarification of rules for advisers, not reducing consumer protection, removing the confusion around the definition of advice and advisers, and toxic products (all the FCA’s role). But a national advice network?

    The “underserved lower to medium income households” need advice on budgeting, paying down debts, saving in an ISA, joining their company pension scheme and protection. Protection aside, MAS, CAB, debt charities and employers already provide advice and guidance in these areas between them. I cannot see why a national advice network is required to replicate this. If people aren’t getting access to this kind of help, surely the MAS, CAB, debt charities and employers should be the focus, not regulated firms/professionals.

    PROFESSIONAL regulated financial planning advice and product recommendations with protection under the FCA/FOS/FSCS regime is not a human right; it must be paid for by the person benefiting from it. It is not for professionals employed by private firms to solve the financial ills of the general populace. It is for professionals to provide appropriate services to appropriate individuals who see the value in that advice and are willing to pay for it at a sensible price, whichever segment of the population.

    As for firms that “lack the confidence to advise consumers without a ‘belt and braces’ approach”, I would suggest that it is the role of a professional to only ever take a belt and braces approach. What other approach should be adopted? It’s certainly the only approach that the FCA would expect to see. And why would you adopt a different approach if you are liable for the advice that you give?

  35. And just who does this bozo think would staff this quango, not to mention pay for it?

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