HC 271 Money Advice Service

Written evidence submitted by the Investment Management Association [1]

Executive Summary

1. IMA supports the work of the Money Advice Service (MAS), but has recommendations that would improve its reach and the depth of its impact amongst the UK population.

2. These are: focus on improving public/stakeholder relations and partnering with experts in relevant areas; more focused communications with its funders; an emphasis on evaluation; and a willingness to share its findings.

3. It would also like to see MAS overtly support personal finance education in schools.

To what extent is the Money Advice Service (MAS) meeting its core statutory objectives:

- 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. It is too early to judge results. We note the strategy MAS has published to meet its objectives and welcome the fact that MAS is focusing on more robust evaluation measures for the future.

How effective is the Money Advice Service’s internal administration and expenditure on staff and other resources?

5. Since the formation of MAS in 2010, we have some concerns that it has not taken sufficient advantage of the groundwork done by the FSA

financial capability team. This includes current projects such as the Parents’ Guide to Money and workplace seminars. Relationships with partners operating in the same area of money advice, such as Citizens Advice, may have weakened and some goodwill may have been lost. However, these observations are not based on first hand analysis. We represent funders of the service, but we have not had an inside track on adminstration and expenditure. The budget looks large, indeed too large to many businesses in the industry. Lack of transparency, until recently, has led to scepticism about MAS's ability to manage it effectively. For IMA, the quarterly meetings of the industry forum, chaired by Laurie Edmans, have helped to rectify this problem.

6. MAS’s advertising campaigns will be less effective if they take place in an atmosphere of negative sentiment about the service. Therefore, MAS needs to work hard to improve its public reputation, through clear communications, not just to its potential customers, but also to partners, opinion formers and funders. It should now demonstrate that it has a coherent plan, founded on value for money, avoiding unnecessary duplication with sister services and retaining staff who can build meaningful relationships with partners at every level. This may have been the case for a while, but MAS has not made it clear to us. We are pleased to note that "achieving greater leverage from our work….by working with and influencing the financial services industry, and regulatory and public policy agendas" is now the second top-line objective in the 2012/13 strategy.

What accountability mechanisms are in place for the Money Advice Service? Are they sufficient? How can the effectiveness of the Money Advice Service be assessed?

7. MAS should be accountable, not just to the Government, but to all its funders, including IMA member companies. The FSA Board appoints the Chair and CEO, and approves the budget each year. However, it appears from Board minutes to date that the governance exercised by the FSA has been weak, probably due to the sheer volume of items on its agenda. We urge all involved to be more vigilant going forward, in particular, the FCA, as it takes over from the FSA. This will give the industry, a supposed beneficiary of the strategy in the long run, more confidence that their contribution is being well spent.

8. The effectiveness of MAS must be assessed by results and we support thorough evaluation. We note that it is setting itself targets both in terms of numbers of customers and the ensuing changes in their behaviour. It is also reviewing the definition of financial capability and suggesting that it should update the findings of the FSA baseline survey, which was conducted in 2006.

To what extent are the services provided by the Money Advice Service also provided by other organisations? How does the Money Advice Service compare to these organisations?

9. The fact that the name Money Advice Service, is so similar to Money Advice Trust and Money Advice Scotland, and even Citizens Advice UK, emphasises its overlap with pre-existing services.

10. Again, it is too early to compare the service provided by MAS to these organisations and the many commercial and public service information websites that also operate in this area.

11. MAS must be careful not to be seen as a competitor. It should complement, support and enhance the services that are already successfully helping members of the public and are therefore relevant to the attainment of its core objectives. If possible, it should not see itself as a one-stop shop for all personal finance information, but as a hub sign-posting customers to further information that can reliably be provided by experts in their field. For example, on the topic of auto-enrolment, MAS should ascertain its role relative to the Pensions Advisory Service, DWP, NEST, other pension providers and employers.

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

12. In the run-up to the formation of MAS, the mantra was that the service would be for everyone. Of course, it has had to break down the population into target groups and we are pleased that it will evaluate its impact on each group. The focus on web information may mean that those without internet access and web skills may lose out. It may also be the case that those same people are those worst affected by a lack of knowledge about financial matters. Therefore, MAS should aim to make special efforts through partners resident in local communities to tailor their service delivery. It may cost more to reach these people through a telephone helpline and one to one meetings, but their needs cannot be ignored.

13. The single biggest reason for MAS's failure to achieve its objectives will be individuals' reluctance to make time to access the services. The Health Check requires some determination to complete and even more to follow up its recommendations. There is only so much MAS can do to encourage this - "You can lead a horse to water but you can’t make it drink".

14. Financial education in schools is a vital foundation to the "information for everyone" mantra. It is a means to develop key skills and attitudes at an early and relatively receptive age which will "enhance the ability of members of the public to manage their own financial affairs". For example, mathematics teachers have said that there are signs that it can improve numeracy attainment, particularly amongst lower ability pupils. A 2008 Ofsted study [1] found that, in schools where personal finance education was being delivered effectively "students had a good grasp of key concepts and could demonstrate the ability to make sound financial decisions". They could, for example, work out the best mobile phone tariff based on projected usage, and identify what factors were relevant to investing a sum of money, balancing risk and return.

15. Parents, teachers and even children in schools have asked for it. In 2011, 90% of teenagers said they thought learning about money was important. [2] In a You Gov poll 93% of teachers and parents thought that personal finance education should be taught in schools. [3] In family households, messages communicated in schools would reinforce those generated by MAS and vice versa. It could also engender a greater willingness amongst parents to review their financial affairs and use MAS to do so.

16. IMA welcomes that fact that MAS is now developing a new National Financial Education strategy, as recommended by the OECD and to be endorsed by the G20. It looks forward to being consulted on this. Many IMA members are surprised when they learn that education in schools is not part of MAS’s strategy and would like this rectified. For a relatively small proportion of its overall budget, and working with existing operators, such as pfeg, MAS could be seen as having a leading role in schools’ financial education programmes.

17. We note that MAS is about to publish some research into the effectiveness of financial education for young people. We support robust evaluation, but also recognize that proving the value of education in specific areas is very hard to achieve. While knowledge and skills can be tested relatively easily – and are, in formal personal finance qualifications - it is harder to capture attitudes and behaviours.

How appropriate is the model, using fees raised from financial services firms regulated by the FSA, by which the Money Advice Service is funded?

18. IMA members are willing to pay their share of the budget, but the current model with levies applying only to FSA regulated firms could be significantly improved. The most obvious step in this direction, especially as debt advice becomes more integral to the service, is to raise funds from credit companies.

19. It must also be recognised by Government that, if MAS succeeds in meeting its objectives, a key beneficial outcome will be a more savvy, less debt-prone population. Also, it will smooth the introduction of "Universal Credit" and other Government policy initiatives. These outcomes are ones which Government policy and tax-payers normally support. Shared funding was originally the favoured approach.

20. The Government, through HM Treasury, The Department for Business Innovation and Skills and the Office of Fair Trading, are consulted in the budget, which the FSA approves. We would like to see more consultation directly, or at least via FSA (FCA) with regulated firms on future plans on spending. More focused communications would help business leaders in IMA's membership understand the strategy, appreciate how well it is being implemented and assess the benefits to them as providers There could also be more positive recognition of the services that the industry itself provides to educate, inform and advise members of the public on personal financial management.

21. IMA’s working relationship with MAS is now beginning to improve again. We are in regular discussions on how the IMA’s own web-based generic information for consumers can complement the Money Advice Service’s information on investing and we are the checking the accuracy of MAS’s own copy. This is a positive development. IMA and its members are prepared to continue their support for its strategy and look forward to being able to assess forthcoming evidence of improvements.

June 2012

[1] The Investment Management Association (IMA) represents the investment management industry in the UK. Its members manage £3.9 trillion of assets on behalf of a wide range of clients including pension funds, life insurance companies and investors in retail funds. At the end of April 2012 funds under management in UK-authorised retail funds stood at £607 billion.

[1] Developing financially capable young people. Ofsted, 2008.

[2] RBS Group Money Sense research May 2012: 50,000 12-19 year olds.

[3] Association of Investment Companies, January 2007

Prepared 15th June 2012