Generic financial advice should to be delivered to consumers free or at "an affordable price" to help consumer understand their financial positions but voluntary standards will need to be put in place, suggests an FSA-commissioned body of consumer and industry financial services experts.
A 24-page report published by the FSA’s Generic Advice Working Group (GAWG) – entitled Financial Capability: developing the role of generic financial advice - suggests there is “almost complete consensus” among its members for the creation of a national network of generic financial advice services, which might then be free or “affordable” at the point of delivery.
Members of the group – which includes officials from the Association of IFAs, ABI, consumer bodies along with product providers and government departments – feel there is an absence of “affordable, accessible, trusted advice on how to manage [consumers’] money now and to plan for the future”.
However, there is also no consensus as to who should pay for generic advice but should perhaps be funded through a centralised source such a government initiative as industry or FSA funding would need to be qualified according to the likely cost.
Similarly, there are still concerns delivering generic advice is risky for those organisations involved as it is unclear exactly how far generic advisers could go before the guidance given requires the adviser to be authorised by the FSA, and the extent of the liability which organisations might then face.
The group, in particular, noted advisers are more likely to be want to be able to answer almost any question asked by the consumer, so the ideal service would be “simple and complete”.
To solve, these problems, the GAWG suggests generic financial advice should never give more than ‘stock’ answers to generic issues but use most of the steps covered by financial advice, stopping at the point at which products types- rather than specific product recommendations - can be identified to cover:
Early analysis of the process could include establishing and maintaining a voluntary standard of recording the advice session, and which could then be presented to the consumer as a summary of basic data, so they can use this data to take to a provider of financial advice or products.
A consistent, but voluntary, standard of generic advice is also being developed by the GAWG through work with the Financial Services Skills Council and the Chartered Insurance Institute to establish a set of quality assurance standards based on core competencies and skills related to generic advice.
The required competencies, performance criteria and knowledge base are currently being established by the associated groups and a further consultation will then be opened later this year so standards can be launched in January 2006 ahead of a pilot programme.The GAWG also points out consumers are not enthused by the term ‘generic financial advice’ so any network would need to create a collective name for the concept.
At the same time as the GAWG’s findings are published, the FSA has also revealed, through the Financial Capability Generic Advice Project (FCGAP), there does not appear to be any single method of delivering or promoting generic financial advice which is most appropriate.
In its report, entitled Advice and the best way of delivering itthe FSA’s FCGAP highlighted research by the New Zealand Retirement Commission, which used a website at the core of its advertising and activities to disseminate generic advice, revealing consumers were more responsive to generic advice once language was changed from ‘retirement’ to a more positive concept of ‘financial fitness for life’.
On the back of this, the GAWG notes an initial trial of the Healthcheck by the BBC website saw 125,000 take the test on its first day, suggesting it is possible to stimulate an interest in web-based generic advice tools if it is offered in a convenient and high-profile environment.While many of the proposals set out by the GAWG should fill the generic advice needs of the ‘mass market, the group suggests further work may have to be considered at a later date as “there are likely to remain some parts of the market which will simply not be provided with any form of generic financial advice”.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email [email protected].IFAonline
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