HC 271 Money Advice Service

Written evidence submitted by the Investment and Life Insurance Group

1.1 Introduction

1.2 Our comments on whether The Money Advice Service (MAS) is meeting its two core statutory objectives are noted below.

2. 1 Are these the right objectives for MAS to have?

2.2 The objectives stated are appropriate. They relate to the provision of information and the development of consumer confidence so that consumers are able to make decisions regarding financial services. 

2.3 Our issue remains that the name Money Advice Service is inconsistent with these objectives. The name implies it is a service giving advice. Indeed, the MAS Terms and Conditions use the term ‘advice’ throughout. This in turn would lead consumers in to thinking the service provided included a recommendation by a professional based on knowledge and experience with a willingness to accept responsibility for the advice given, and to provide redress should the advice prove to have been inappropriate. We suspect the distinction between ‘advice’ and ‘money advice’ is too subtle for the majority of consumers.

2.4 The name Money Advice Service remains inappropriate.

3. 1 How effective is the MAS’s internal administration and expenditure on staff and other resources?

3.2 We cannot comment definitively on this, but we would suspect that the expertise will not be sufficient to give advice in the sense set out in 2.2 above.

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

4.2 Our understanding is that the MAS is not accepting responsibility for its comments. If so, accountability does not therefore really exist. For example, the Disclaimer section of the MAS Terms & Conditions states that it accepts no liability for the accuracy of the website or errors and omissions. Further, no liability is accepted for any damages arising from use of the site or for information or advice given by the MAS Money Advice Line or face to face advisers. What recourse to redress does a consumer have for negligence?

4.3 If the MAS were to be accountable, measures of its performance could be by way of, for example, publication of its complaints statistics and an independent review of a sample of advice given.

4.4 The MAS requires significant funding and therefore frequent reporting & transparency is required to inform stakeholders of its activities and performance.

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

5.2 We do not see any real comparison as regulated companies have to accept responsibility for the advice they give. 

6.1 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?

6.2 We are not aware that anyone who wishes to do so is unable to access the MAS.

6.3 It is difficult to say whether the MAS is reaching its target audience because it is not clear what the target audience is. We assume it is investors who are

Ø reasonably prosperous,

Ø financially unsophisticated

Ø unaware that they need basic financial services

Ø unwilling or unable to seek independent advice and for one reason

Ø do not currently have a source of ‘restricted advice’ relevant to their then current needs.

6.4 We understand targets have been set for the numbers of users of the service (11.3 million users a year in 2016-17 and for 2012/13 the target is to reach 1.9m people, including 88,000 through face-to-face advice and 90,000 people through the contact centre). We are not aware of any qualitative measurement. We would like to see a complete analysis of how much of the target market is engaging with the MAS and how many consumers are satisfied with the service. We would also like to see some form of feedback to demonstrate what consumers have done and what benefits they have derived by following the guidance given by the MAS. Without this the cost/benefit analysis for the industry levies being incurred remain a mystery

6.5 We are not sure that the MAS need have a greater role in education; however, the current website financial plan tool with some enhancement would seem to be a good place for school children to start.

 

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

7.2 When it was set up, the insurance industry was concerned that it would be contributing towards a service that would be predominantly aimed at people needing to repay debts or save for emergencies. It was not expected to achieve much towards educating the population in financial matters, or promoting saving, investment or protection and many saw the job of education as something that should also take part in schools, and therefore funded from the education budget. We have seen little evidence that the costs incurred have produced any real value for the community, or industry.

7.3 Assuming the existence of the MAS in its current form is not subject to full review, although not an attractive solution to the industry, it is difficult to see how else the MAS could be funded. However we support the Money Advice Trust’s observation that a broader range of creditors than those who pay the Financial Services Authority’s/Money Advice Service’s levy benefit from debt advice. The MAS and the FSA (or going forward the Financial Conduct Authority) should consider extending their levy to cover all creditors.

7.4 Assuming that it is to continue we would like to be assured that it will operate in future in a way that provides a service to firms own potential customer bases which has a value commensurate to the levies paid. We are aware of no measurement or evidence to support this currently.

June 2012

Prepared 15th June 2012