Consumers could spend an extra £1.1bn on financial products if generic financial advice (GFA) or 'Money Guidance' is introduced, according to the Thoresen Review.
The review, published today, claims the concept would "drive behaviour change", leading to increased demand for products and extra sales of anything between £400m and £1.1bn, excluding general insurance, by 2060.
It says a test-run of a prototype of GFA found 40% of people would either buy a product or speak to an adviser "within a week or so" of receiving the advice.
It also estimates Money Guidance would save the financial services industry up to £210m in reduced regulation costs as the scheme would fall outside of the FSA's regulatory remit.
However, setting up the scheme will cost the industry between £390m and £832m, it says. Financial services companies and the Government will equally share the scheme’s £49m-a-year running costs.
Prudential was one firm to speak out against generic financial advice in its response to the review’s interim report.
"GFA will…produce very limited benefits for financial services companies," it reads.
"Consequently making it a convincing case for financial services companies to co-fund generic advice based on commercial benefits is, we believe, impossible.”
In total, Thoresen says the service will generate around £5bn in benefits for the financial services industry, £6bn for the Government and £15bn for consumers.
Ian Costain, head of public affairs at AXA UK, expects to see a rise in demand for investment, pension and protection products.
One of the key things is we need to engage people and this service," he says. "If it is universal, it will attract people form all sorts of income ranges.
"We would expect any effective engagement campaign will give referrals of a real cross-section with money to invest.”
Andrew Tully, marketing technical manager at Standard Life, adds: “We need more detail in the cost benefit analysis. It’s not clear what products are being talked about. It could be bank products or national savings products. It’s too early to say what type of products people will be particularly interested in.
“I think we have very little detail on how this service is going to operate. They talk about face-to-face advice but it seems unclear how much face-to-face advice there will be for the money we are talking about.”
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