Generic financial advice (GFA) will not duplicate specialist debt advice services says Otto Thoresen, author of the Thoresen Review of Generic Advice.
Speaking today at the ABI Saver Summity, Thoresen, chief executive of Aegon, said: "I am not interested in creating another specialist debt service."
Instead, he says he wants the GFA service to help people take charge of their affairs before serious problems develop by referring people to existing debt advice companies and taking referrals from them.
“It will be there to provide help and support so that when they have resolved their immediate financial crisis they do not relapse into the behaviour that caused it in the first place,” he adds.
He says it is "feasible to build a national service” and the benefits of GFA will outweigh the costs by about three-and-a-half to one.
However, he says firms may see a 7% to 14% increase in FSA fees when the regulator establishes GFA. The FSA would leave firms to decide what an increase would imply for them.
“That does not mean I have concluded the service should be funded through the FSA levy – it’s just a convenient way of illustrating the possible level of cost,” Thoresen comments.
He says he remains “open to persuasion” over whether voluntary contributions would work better than a compulsory levy to run GFA.
He says: “My main concern is over the fairness and sustainability of a voluntary approach. If it can be demonstrated that a system of voluntary donations could be fair and sustainable, I would be happy to recommend that approach.”
He adds firms could provide the service with funding in kind such as lending staff, office space or IT support, or becoming an accredited service provider, instead of giving cash donations.
Thoresen also suggests the FSA should call on companies who sell non-regulated products such as credit cards and loans to contribute to GFA as their customers will probably use the service.
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"Whilst there is no debate as to the need for generic advice, it’s difficult to see a compulsory levy being an appropriate course of action, since it is effectively compelling the private sector to fund a public initiative, regardless of the perceived industry benefit suggested.
"Can you imagine accountants agreeing to being compelled to provide funding for generic tax advice, or lawyers to fund the legal aid system?
"The legal aid system whilst having a different target, itself is an example of how to provide collaborative support in certain areas of need. The paper; 'Legal and Advice Services: A Pathway to regeneration' http://www.dca.gov.uk/pubs/reports/pathway.htm; gives an insight in to how a more co-ordinated and holistic approach can be achieved, with legal practices themselves playing an important role in partnership with other organisations.
"Such a levy would also bring a market distortion putting UK firms at a disadvantage, unless a mechanism is introduced to ensure that non-UK domiciled firms selling in to the UK market also have to pay the levy. Therefore surely a formalized voluntary approach can be the only practical way forward?"
Michael Riley is an IFAIFAonline
Three years at Wells Fargo
Effective from 9 December 2019
One firm with permission suspensions left
Continuing the Architas education series for clients.
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