Questions have been raised as to whether the Government’s new guidance body will end up with the right remit as the Lords continue to debate what the new service will look like.
As the proposed single financial guidance body’s “to-do list” looks to be growing a year before it has even launched, the Government is looking at ways to ensure it is up to the job.
The Financial Inclusion Centre founder Mick McAteer says the body needs to fix the “artificial distinction” between the terms “guidance” and “advice”, noting that in any other walk of life the two terms mean the same thing.
SimplyBiz joint managing director Matt Timmins agrees. To ensure clarity of message, he says he would like to see the word “knowledge” or “information” replace “guidance” in the organisation’s branding.
However, the Lords recently voted against introducing further legislation to differentiate between “guidance” and “advice”.
Chief executive of The Pensions Advisory Service – which will merge with the Money Advice Service and Pension Wise to form the new body – Michelle Cracknell says as the Department for Work and Pensions is not expected to launch the new body until autumn 2018 at the earliest, it is early days.
She says some people use the term “advice” even when they understand they are receiving guidance.
She says: “People do understand that ‘guidance’ does not provide a definitive course of action.
“Over 34 years, The Pensions Advisory Service has not had any issues with customers claiming that they had been given regulated advice, which does show that customers understand the difference.
“The extent of the guidance, for instance, whether the deliverer of the guidance will benefit from the outcome, should be disclosed and understood by customers.”
While the objectives of the proposed body seem fairly straightforward, McAteer says if it will need to increase its resources to compete with private guidance offerings.
McAteer says that “with Brexit on the cards, not much else will be getting through Parliament anyway”, this is one of the core challenges facing the new body, along with bringing pensions and debt advice together in a holistic manner.
When it comes to the creation of a single guidance body, Timmins stresses it is “desperately important” that it is fit for purpose.
He says: “It is equally important that those within the body and those who use it have complete clarity around exactly what that purpose is.
“Consumer debt, which is growing at a frightening rate, an increase in both the breadth and the sophistication of scams and – since pension freedoms – more options available to individuals mean that access to information on financial matters is more important than ever.
“A single, consumer-facing body will have the ability to reach consumers and communicate vital messages on a much broader scope than financial advisers.”
While he recognises the value of offering information to help people avoid being sucked into financial scams and help them manage their debt, Timmins warns of an unintended consequence.
He says: “When an individual receives guidance but believes they have received advice, it could prove to be worse for them than receiving no information at all.”
Currently there is no proposed minimum standard of qualification for guiders in the new service.
TPAS has always required its staff to have pensions experience and Chartered Insurance Institute qualifications, whereas the Money Advice Service does not.
However, Cracknell says MAS staff “do recognise the knowledge needed for pensions guidance,” so MAS customers that have pension questions are directed to TPAS.
CanScot Solutions partner Robert Reid says this could present an issue, because “until you know a lot, you don’t know how little you know”.
Once the body’s objectives are fully mapped out, the Government can ascertain how much funding is actually needed.
McAteer says it should calculate the levies accordingly, but he expects in future the funding pool will broaden out to include the utility companies – often associated with debt issues.
Reid says all parties should contribute.
He says: “If you are involved, then you need to pay up. Nest, The People’s Pension, Smart Pension… all of them, and they should pay according to headcount. There is no such thing as a free lunch.”
But Timmins disagrees. He says as a Government initiative, the Government, not industry, should fund the guidance body.
He says: “The idea that advisers should face an increased levy to help fund an organisation which offers an entirely different service on the basis that they might, one day, receive an increase in business as a result is a nonsense.
“The body, if it is operating properly, should be an instrument of social and societal good for the UK and, advisers, as taxpaying residents of the UK, are already making a contribution.
“If the new information body does result in an increase in the numbers of people accessing professional advice, on a sustained basis, then maybe the issue of funding could be re-addressed.”
Reid sees an potential opportunity for new entrants to the advice sector who are lacking the skills needed to give full advice to use the guidance body as a training ground.
Rather than one of the current constituent organisation heads taking charge of the new body, some feel that a new candidate should be sought to take the helm.
Reid suggests a long-time distribution specialist who has experience of working in a regulated environment rather than a “lifelong civil servant”.