HC 271 Money Advice Service

W ritten evidence submitted by moneysavingexpert.com

1. About MoneySavingExpert.com

MoneySavingExpert.com is the UK’s biggest money website dedicated to saving consumers money on anything and everything by finding the best deals, beating the system and campaigning for financial justice. It's based on detailed journalistic research, cutting edge tools and has one of the UK's top ten social networking communities.

In April 2012 there were over 13 million users a month visiting the site 23 million times and looking at over 74 million pages. Over 7 million people have opted in to receive the free weekly email and more than 1 million users have registered on the forum.

2. Executive Summary

MoneySavingExpert.com welcomed the creation of the Money Advice Service (MAS) and continue to believe it could play a n important role in improving the financial capability of consumers in the UK.

We consider the overall objectives of MAS to be in the right direction ( though more focus on targeting those in most need of help would be welcomed ), the funding model appears fair and we make no comment on administration and expenditure on staff and other resources .

We d o have some areas of concern mainly in relation to unnecessary waste in duplicating other organisations services but also the lack of resource being directed at those groups who need most assistance , eg , the financially excluded and the financially incapable.

We welcome the Treasury Sub-Committee ’s focus on accountability and believe that increased transparency and accountability for MAS would not only benefit policymakers, the financial services industry and consumers but also the organisation itself.

3. Response

The core statutory objectives of the MAS are to enhance the understanding and knowledge of members of the public of financial matters (including the UK financial system), and to enhance the ability of members of the public to manage their own financial affairs.

4. Are these the right objectives for MAS to have?

Yes, th ese are largely the right objectives but MAS should focus its limited resources using its levied funding i n these areas:

· Examining what work is already being carried out successfully in the sector and filling any gaps, rather than replicating the tried and tested approaches of both third sector and private organisations that have already been proven to achieve the same objectives.

· Continue to facilitate independent, impartial and effective financial education in schools. After a debt-ridden financial crisis and rise in tuition fees now is the time to ensure young people are equipped to make informed financial decisions. We need to set our children up as effective empowered consumers and we need to do it now. Any loss of momentum will leave us with another generation of debt–bingers relying on plastic as a crutch to fuel unsustainable lifestyles.

· In relation to post-school activities MAS s hould revert to its past and focus on the vulnerable , i e , those with little or no access to , or understanding of , financial information. These are the areas that other agencies find it hard to reach or only make limited impact upon. Typically these people will not be best served by a web based service. A public body is the best place to meet their needs.

5. How effective is the MAS’s internal administration and expenditure on staff and other resources?

MoneySavingExpert.com is not in a position to comment on this question .

6. What accountability mechanisms are in place for the MAS? Are they sufficient? How can the effectiveness of the MAS be assessed?

MAS funding and governance arrangements appear to present a challenge as they do not h ave any real precedent . We believe MAS needs to have freedom to operate yet it must be accountable for its overarching strategy and the effectiveness of its performance.

The organisation appears to be accountable to no one. The FSA are no longer responsible for MAS and the Treasury appears to have little real authority over it .

MAS communications emphasise this by stating MAS, "... was set up by Government with cross-party support and is funded by the financial services industry. It is independent of both. "

We also believe MAS is not subject to Freedom of Information (FOI) requests. Given its status and responsib ilities this seems a little disjointed . Ensuring it is subject to FOI requests would ensure greater accountability and transparency.

There may be some hope of scrutiny from the new Financial Conduct Authority (FCA) but this area needs to be more clearly defined to ensure accountability is not just in name.

Although MAS has a draft memorandum of understanding in place with the FCA , as required by the Financial Services Market Act ( as amended ) , www.moneyadviceservice.org.uk/_assets/downloads/pdfs/ fca_mas_draft_mou_20120229.pdf,t he current draft appears to do little more tha n highlight the FCA ’s role as rubber stamping the MAS annual budget and business plans as well as levying monies - on beh alf of MAS - from authorised firms, payment service providers and electronic money issuers.

Yet even this is only a statement of intent and does not create any enforceable rights. The draft nature of this memorandum means accountability to the FCA could easily be strengthened if the Treasury Sub-Committee were to call for this (equally it could be further weakened without political pressure for proper accountability).

7. To what extent are the services provided by the MAS also provided by other organisations? How does the MAS compare to these organisations?

Government, Government agencies and non-departmental bodies should avoid spending public money on duplication of services which are already hitting the goals required.

As an analogy, how does the Government provide facebook type services? The answer is of course, by u sing Facebook. Government or Government agencies do not seek to re-create Facebook , it utilise s existing platforms that have proven effective and are widely known .

With this in mind it should be noted that there a re a wide range of properly functioning online services that substantially exceed the offering of MAS. Instead of reinventing the wheel and spending millions of pounds in brand building to unnecessarily compet e with these sites , it would be more efficient for MAS to evaluate the information provided on such sites to ensure it is of benefit to the consumer.

MoneySavingExpert.com would welcome the opportunity to work with MAS on providing tools and resources that genuinely empower consumers in an impartial and independent manner. We would be very happy to have our resources ‘recommended by the MAS’ based on objective criteria , as, w e suspect would other editorially independent organisations offering financial information to consumers.

Indeed we believe this strategy could both act to improve content around the sector,
and enable new public sector tools to instantly reach more people than MAS will ever be able to do , by creating its own content and far more rapidly.

For example, recently MoneySavingExpert.com worked with
the Trading Standards Institute on a free ‘no cold callers sign’ which could be distributed to users . O n its first day alone 150,000 downloaded the sign , a different range of magnitude to the number the Trading Standards Institute could have reached on its own.

W e understand that as part of the MAS new online services planned for 2012 it will begin offering price comparison table s for consumers . The justification for doing so is that it will provide an independent alternative to commercial comparison sites who charge product providers levels of commission that vary, creating a commercial interest in promoting ce rtain products over others. This can lead to a lack transpar ency and consumers can be misle d into thinking they are opting for the cheapest product or service when they are not.

T he four largest commercial comparison sites GoCompare , Confused , Moneysupermarket and Comparethemarket have spent hundreds of million s o f pounds o n advertising in the last few years . Add to this the fact that Google has recently launched its own financial comparison site and any investment in this area would appear ill conceived.

The £20m a year budget, as confirmed in the MAS 2012-13 Business Plan, cannot compete with such huge figures.

T he rationale that an online facility enabling consumers to make an informed choice - that is not dependent on commercial considerations with specific product providers - remains sound. We believe sites including MoneySavingExpert.com and Which? already offer thi s to consumers .

MoneySavingExpert.com has built up a very strong reputation for independence, impartiality, reliability and trustworthiness. Anything on our main site is there because we believe it is the best way to save money, based on independent, detailed and specialised journalistic research by members of the team. Financial considerations do not impact inclusion in articles.

Using this model each month we attract substantially over 1 0 m illion unique users . M ore consumers in a single month than MAS aims to be reaching in a single year by 2016/17. Plus over 7 million people have opted-in to receive our free weekly email.

To re-iterate MoneySavingExpert.com would welcome the opportunity to work with MAS on providing tools and resources that genuinely empower consumers in an impartial and indepen dent manner and to have our site, or part of it, recommended and assessed as an independent provider of financial information that MAS , we hope , would be happy to recommend.

8. Is the MAS reaching its target audience? Are any groups unable to access the MAS’s services? Who is worst affected by a lack of knowledge of financial matters? Should the MAS have a greater role in financial education in schools?

A s stated above , MoneySavingExpert.com believes that MAS should spend its resources focusing on things that other organisations can’t do. This includes a greater commitment to the provision of independent, impartial and effective financial education in schools and that in relation to post-school activities it should have a much stronger focus on the vulnerable and those in greatest need .

SCHOOLS

MoneySavingExpert.com has been involved in campaigning to get compulsory financial education on the curriculum. It is one of the core sponsors of the All Party Parliamentary Group on financial education for young people and has organised 100,000 signatures to get the issue debate d in parliament.

Yet co-ordinating and working with schools to ensure provision of financial information
takes place on a wide-scale basis is something we believe more appropriate for a public body .

We are in desperate need for an appropriate level of investment in teaching materials and teacher training to get financial education in each and every one of our nation’s schools. While great work has been done in this area by organisations such as the Personal Finance Education Group, MAS is well placed to facilitate and fund the development that is still needed in this area.

However , disappointingly, t he MAS financial capability focus on schools appears to have ended. It is now focusing simply on mapping the existing provision of financial education in schools before switching to doing no more than signposting others to what is available. The work is being left to underfunded organisation s .

We accept that the outcomes of some of MAS’s previous work in schools (whilst part of the FSA and then as CFEB) may not have delivered the outcomes it was originally hoping for. However, rather than abandoning the idea altogether it would be better advised to look at what approaches have been independently proven to work, concentrate on supporting those areas and provide teaching staff with proper training and resource s .

Halting the support for provision at this stage does more harm than good. The best way to break the cycle of debt illiteracy is in schools before people have access to such finances. Mistakes made early stay with people for many years and can debilitate peoples financial li ves .

We cannot continue with the current situation that some children receive financial education and some do not as this will only create a wider gap between the financial ly capable and incapable consumers trying to function in one of the world’s most complex economies.

Future generations of consumers need to be better equipped to make informed financial decisions, those best placed to do this, ie , teachers, are calling for support to do so but there is no help from MAS or Government .

Teachers need to be properly trained and resourced to teach the subject effectively and MAS could play a role here - as it has successfully in the past.

VULNERABLE GROUPS

Whilst financial capability is a universally important skill, and poor financial decisions affect people across all incomes, those who are better off are more likely to have the advantage of some form of financial cushion whether that is savings or better access to affordable credit.

In contrast the most vulnerable in society and those who can least afford to make financial mistakes are those who pay most . For example , those without a bank account are unable to benefit from direct debit discounts, with electricity key meters they are charged more, they will pay higher interest charges, be more susceptible to pay day loans and so on.

There are many vulnerable groups that MAS should be assistin g. MAS predecessor organisations did make attempts to assist these specific groups.

For instance, through printed information packs sent directly to new mothers (these are now available purely online) through free face-to-face workplace financial education programmes (these have stopped completely) and the provision of a whole host of p rinted materials including publications such as ‘Your guide to retirement’ and the ‘Redundancy guide’ which were made available in visitor centres, libraries, staff quarters and in some circumstances sent direct to relevant audiences (all have ceased or are only available to download from their web site) . Similarly the face-to-face -to-face work with offenders appears to have been halted as does their work with housing association tenants.

Although MAS ha s voiced a firm commitment to giving general face-to face and telephone advice, their target numbers suggest where its priorities are, ie , nearly all of the intended target audience for their services are internet users.

Policymakers should note that financially excluded groups are also less likely to have internet access and so the MAS web service will often not meet their needs. In essence it appears to be focused on reaching as many consumers as possible via a visit to their web site in order to meet their performance targets rather than having a genuine desire to help those who need it most.

Such a course of action is highly counter productive and rather contradictory when its own d ebt business plan includes the comment that, for over-indebted people, face-to-face debt advice is the most effective option.

With regard s to debt advice, although we are still getting evidence on this, we have additional concerns at the increasingly frequent amount of times we are hearing about issues with the co-ordination of debt advice across the UK now that it is being administered by MAS. A situation we do not think we would be in had MAS taken into account the expertise of those on the ground rather than trying to reinvent the wheel.

9. How appropriate is the model, using fees raised from financial services firms regulated by the FSA, by which the MAS is funded?

We are more concerned about how wisely the money is invested rather than its origins. That said , the current arrangements appear to be sensible. Whilst the individual benefits from being a better informed and more active consumer, the financial services industry a nd wider economy benefits too , e g , t hrough enhanced unde rstanding of financial services the industry should benefit from fe wer incidences of mis-selling and increased purchase s of appropriate products.

June 2012

Prepared 15th June 2012