The cost of the new generic advice service or Money Guidance scheme will be in the region of £49m a year to be split equally between government and financial services companies, Otto Thoresen announced today.
Unveiling his Review of Generic Financial Advice, Thoresen says the industry’s share should be raised via a levy, with contributors drawn from firms regulated by the FSA, consumer credit firms regulated by the Office of Fair Trading, and National Savings and Investment.
The Review estimates the service will generate £5bn in benefits for the financial services industry, £6bn for the Government and £15bn for consumers. It is believed the service will be used by around four million people a year.
Thoresen has called the service the Money Guidance scheme because he says consumers would not know what 'generic' means in this context and believes the term 'financial advice' would deter them from seeking help.
He says the new service should be sales-free and focus on giving people information and guidance on budgeting, saving and borrowing, protection, retirement planning, tax and welfare benefits, and jargon busting. It should stop short of recommending specific products.
A combination of telephone, internet and face-to-face guidance should be provided and he believes the most appropriate way of delivering a Money Guidance scheme is a partnership model.
This would mean a central body would direct the strategy, set standards and deliver some services, but with much of the service delivered by accredited partner organisations.
There could be a role for IFAs as part of the marketing strategy for Money Guidance which Thoresen believes should be multi-faceted and should encompass national and regional marketing campaigns and engagement activities; trusted intermediaries; and social networks and viral marketing.
Thoresen says: "It is a service people need but don't yet realise it. It is not a case of if we build it they will [just] come."
To ensure the national Money Guidance service can be up and running as soon as possible, the Government should set up a regional pathfinder service as soon as it has considered the report.
The Review believes a large-scale pathfinder that enabled the report’s recommendations about the service to be thoroughly developed and road-tested should last around two years and would cost around £10-12m. The FSA will control the scheme in the short to medium term.
Stephen Haddrill, director general of the ABI, says: “The pathfinder provides an opportunity to develop the original concept of a service delivered by a range of commercial and non-commercial providers. This will give the best possible access to generic financial advice for the widest possible range of people.”
Otto Thoresen said: “Partnership should be at the heart of a Money Guidance service. This would allow the service to build on the expertise of existing organisations who provide help and advice to the public and are able to reach out to people in ways and places that are convenient to them. I have spoken to many such organisations over the past year and I know that they are keen to help.
“I considered whether an entirely new organisation should be set up to run Money Guidance, but concluded that in the short to medium term the FSA should take this forward. I believe it makes sense for this important initiative to be led by an organisation that is recognised as a world leader in financial capability.”
The Review of Generic Financial Advice, launched in January 2007, stems from the Government's financial capability programme, which aims to ensure consumers understand financial planning.IFAonline
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