Blunkett stresses Government scheme needs refining, and must target less wealthy to succeed
The government's Money Guidance scheme will roll out over the next three years, but several details need clarification to prevent it from falling flat, according to industry figures.
Addressing advisers at a panel debate during the International Investment forum last month, former secretary of state for work and pensions David Blunkett said it is crucial the scheme targets the lower end of the wealth spectrum.
Money Guidance was originally proposed by the Thoresen Review of how to get financial advice to lower earners.
"If the Money Guidance service does not dramatically touch a large part of the population, then it will be a huge waste of money," he added.
"We can argue about who should fund it, but the issue is how will it reach people?"
The key point is to change people's view of what is available to them, Blunkett said. "It is about aspiration. There are millions of people who are taking out credit to live a particular lifestyle, and then taking out more credit to pay off the credit," he added.
He emphasised the need to reach these people preventatively, and said he has confidence that the one-third of the population who are already saving for retirement can be expanded.
Blunkett suggested that banks have a role to play in funding the scheme, as they stand to benefit from a more savvy financial population and broader potential customer base.
Tory party leader David Cameron has previously said banks should shoulder the entire £49m estimate annual cost of the scheme.
Blunkett said: "In my view, once we are over the particular problems of the moment, which banks are using as an excuse not to pay for anything, they may well have to contribute. Far be it from me to agree with David Cameron, but I don't see why they shouldn't take a share."
Issues for advisers
Meanwhile, Lucy Courtenay, director of education at the Institute of Financial Planning, said advising those with limited assets on how to make the most of them is often more difficult.
"I believe that financial planning follows a similar process, whether you are dealing with multi-millionaires or the much less wealthy. But it is arguably more challenging for those with lower incomes," she added.
The most vulnerable people who are the primary targets of the scheme are also those least likely to pick up the phone and make use of the service.
Fay Goddard, deputy director general of Aifa, said clever marketing of the service would be key to engaging people who usually have no dealings with the financial services industry.
She added: "It will take creativity to make the marketing campaign interesting. But if Money Guidance becomes as trusted a source of information as the Citizens Advice Bureau is, it will spread by word of mouth."
A further concern is that the Money Guidance service could be seen as a sticking plaster for people who have already hit a financial crisis, rather than as a pre-emptive measure.
Courtenay said the service has to be correctly targeted to avoid this. "Otherwise, it could end up like an accident and emergency unit where people go when they are already in arrears, and it is too late for long-term planning," she added.
Services such as the Citizens Advice Bureau already exist to meet the needs of people having debt-management issues or facing repossession, for example.
Money Guidance is designed to take a more positive approach, encouraging people to budget, save and invest wisely for the whole of their lives.
Victoria Nye, director of consumer education and training at the IMA, said her organisation has supported the Thoresen Review throughout its development, down to the final recommendations for the Money Guidance scheme, with certain caveats.
She emphasised the potential benefits for IFAs, who could find clients coming to them on the back of the generic advice given by the scheme.
"If Money Guidance is presented in the right way, it could start people on the first rung of the ladder and deliver them as warm leads to IFAs because they would be more aware of their own financial needs," Nye said.
"However, the service itself needs to be clearly defined, not commercial, and have a clear referrals system - whether the query is for pensions, insurance, or debt management.
"If the boundary is breached, it will be undermined. We already know people do not trust the financial services industry."
Courtenay agreed there must be a clear dividing line between guidance and sales, which raises questions as to who would actually deliver Money Guidance advice in an impartial way.
Despite the many issues that remain to be thrashed out, many industry players agree the Money Guidance scheme is a step in the right direction.
Goddard said: "If Money Guidance can be implemented as proposed, it will benefit both the public and the financial services industry. But it has to be supportive by offering real guidance, not just sending people away with leaflets.
"It has to be universal and open to everyone, and it has to be sales-free. If people are advised and then sold products, it will be undermined and will fail. The scheme is ambitious, but if it is a success, it will be of benefit to everyone in the UK."
International Investment Calendar
4 September 2008: II Channel Islands Forum, Hotel de France, St Helier
10 September 2008: II German Summit, Frankfurt Marriott Hotel, Frankfurt
24 September 2008: II Nordic Forum, Grand Hotel, Stockholm
30 September 2008: II Swiss Summit, Park Hyatt, Zurich
2 October 2008: II Benelux (formerly Netherlands) Investment and Pensions Forum, Hotel Okura, Amsterdam
21 October 2008: II Iberian Investment Forum, Intercontinental, Madrid
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11 November 2008: II Nordic Investment Summit, Grand Hotel, Sweden
17 November 2008: II Middle East Gulf Forum, Emirates Palace, Abu Dhabi
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