Money Advice Service

Written evidence submitted by Credit Action

Executive Summary

· Credit Action welcomes the opportunity to contribute to the Treasury Select Committee’s inquiry on the Money Advice Service (MAS). We are a third-sector organisation involved in the provision of financial capability programmes to both young people and adults, including through direct delivery in schools, and therefore have a first-hand understanding of the field in which MAS operates. Due to its substantial resources and leverage, MAS has a considerable impact within the financial capability sector, and strategic decisions that it takes help to define what provision looks like across the UK.

· MAS’s statutory objectives are deliberately broad, and it is therefore difficult to say that it is failing to meet them. However, in our view there are questions about whether MAS’s current strategy is the most effective one for achieving those objectives. MAS appears to be focused on building a monolithic brand through which to reach consumers, and providing services to them through predominantly online channels. This approach has implications for both MAS’s users and other providers, which we will outline in our response. We feel that, sadly, an ideal opportunity to bring the sector together, and to ensure a range of appropriate and coherent services are in place to support consumers across multiple channels, is being missed.

· By creating a mainstream service which is mainly accessible through online channels, MAS may not be able to reach certain groups. As well as the digitally excluded, there are some groups for whom online delivery is simply not appropriate. Indeed, the Thoresen Review originally envisaged that MAS would be a multi-channel service with "targeted engagement" for specific groups such as the young or "vulnerable". As MAS draws back from non-digital programmes, other providers in the sector will need to act to meet gaps in provision that are left behind, which in our view is the reverse of what should be taking place.

· Ideally, we see MAS’s role as providing strategic co-ordination for the sector, engaging in direct delivery where necessary to fill gaps in existing provision, but also funding other organisations where appropriate and acting as a thought-leader. We would see this approach as extending to MAS’s involvement in financial education in schools, where we feel the most suitable role for MAS is not for it to undertake direct delivery (as a range of providers already exist), but rather in funding and helping existing providers to operate strategically, so that their initiatives complement each other.

· While we have questions over MAS’s strategic approach, we are supportive of the model of raising funds through fees from financial services firms, as we do not believe there are currently any other viable options for raising this level of funding specifically for the provision of financial capability initiatives. We would, however, like to see MAS consulting and engaging with the financial services industry and others in a more effective way.

· In this submission, we have deliberately restricted our response to MAS’s current financial capability work, rather than to its new role in the debt sector. As a financial capability charity this is clearly the area of most significance to us, but equally, as the most mature part of MAS’s role, it is the area in which MAS’s strategy and actions are currently having the most impact. However, many of the issues, particularly those of brand and clarity of role, can equally be applied to debt advice.

To what extent is the Money Advice Service meeting its core statutory objectives?

1. MAS’s statutory objectives are deliberately broad. There are, therefore, a number of ways in which they can be achieved, which makes it difficult to say that MAS is failing to do so. As long as they are accurately maintained, many of MAS’s services and tools (such as its online comparison tables and healthcheck) undoubtedly can contribute to enhancing the public’s understanding and knowledge of financial matters, and their ability to manage their own financial affairs. That said, it is perhaps difficult (at this stage at least) to determine the degree of impact that MAS’s services have on its users.

2. In our view however, the real issue is whether the approach that MAS is taking is really the best and most cost-effective way to meet these objectives. MAS originally inherited a National Strategy for Financial Capability from the Financial Services Authority (FSA), which included a multi-channelled advice service, as well tailored information and education products and services for particular groups (including "vulnerable" consumers). However, MAS’s current approach marks a significant departure from this, as its offering is now focussed through a single, online delivery channel. It is unclear on what basis the decision to shift away from the FSA’s original strategy (described as "world leading" by the National Audit Office) was made, and certainly any empirical evidence used to support this decision has not been shared publicly. Ultimately, this change is one that will have significant implications for both MAS’s users and the financial capability sector as a whole.

3. MAS’s decision to move to a predominantly digital platform closes off certain alternative delivery mechanisms, and means that opportunities to reach consumers directly are being lost. For example, one product that MAS inherited from the FSA was The Parent’s Guide to Money, an advice handbook distributed directly to all new parents through a distribution partnership with the Royal College of Midwives. However, almost all of this content has now moved exclusively online, despite research showing that parents valued the product in a printed format.

4. Another important consequence of this shift in emphasis is that there are some groups (such as young people or "vulnerable" consumers) for whom online may not be the most effective delivery route, and that MAS is therefore likely to have difficulty reaching (we will return to this point in paragraphs 17 and 18).

5. The transition to online also has implications at a sectoral level. The fact that the non-digital offering that MAS inherited from the FSA has essentially been allowed to whither has placed other organisations in a position where they will have to meet gaps in provision left by MAS. In our view this is the reverse of the way the sector should operate, and means that MAS is missing the chance to bring the financial capability sector as a whole together and help establish a far more joined up approach.

6. The financial capability sector is exceptionally diverse – there are a multitude of different organisations which provide financial capability services of some description, often aimed at quite specific groups such as young people in schools or social housing tenants. Given the real need for financial capability across the UK, there is undoubtedly still space for an agency to add real value by identifying and filling gaps in provision, either directly or by funding others. MAS is an organisation with the scope and resources necessary to take on this role.

7. In addition, MAS could assume an oversight function, acting as thought leader and co-ordinating existing projects. We believe that MAS could add real value in the sector by engaging other providers, promoting shared learning, and generally leading a far more integrated approach to financial capability in the UK. However, in order to be successful in this, MAS would have to move away from its current focus on online delivery, and also improve its general approach to stakeholder engagement and partnership working, which has been limited across all sectors.

Are these the right objectives for MAS to have?

8. In themselves, MAS’s core statutory objectives (as set out in Section 6A(1) of the Financial Services and Markets Act 2010) do encompass the top-level duties which we would expect it to have towards consumers, certainly in terms of its financial capability functions. As outlined in our previous answer, we believe that the central issue is not about MAS’s objectives, but rather about how it is trying to achieve them, and the broader implications of the approach it is taking in doing so.

9. However, Section 6A(2) of the Act contains a number of subsidiary objectives which do attempt to define in greater detail how MAS should execute its core functions. Perhaps if further consensus was reached as to how MAS ought to deliver its core objectives, it might make sense to consider redrafting Section 6A(2) to better define and tighten MAS’s role.

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

10. As the Committee is no doubt well aware, there has been extensive press commentary about the level of salary drawn by certain members of MAS’s senior management team, as well as the amount of staff turnover that has taken place in recent months.

11. If such reports are to be believed, we would be concerned that excessive resources are being spent on large remuneration and redundancy packages, and to pay inflated interim and consultancy rates, which could otherwise be used to support the delivery of financial capability initiatives.

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

12. The FSA set up MAS (originally as the Consumer Financial Education Body) in April 2010. They were also responsible for the appointment of the Board, Chair and Chief Executive (in the case of the latter two positions, appointments were made in conjunction with the Treasury). The FSA also exercises a number of oversight functions for the MAS, including: the approval of their strategy through the annual approval of their Business Plan and Budget; the approval of any deviation from the published Plan during the course of the year; the ability to increase their funding through the FSA levy; the review of the Annual Report each year; the ability to commission a review of the economy, efficiency and effectiveness with which MAS has used its resources; and the ultimate removal of the Board members.

13. If used effectively, these mechanisms appear to be robust. However, it is unclear if or how these measures have been used.

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

14. As a result of its shift to primarily online service delivery, MAS has placed itself in competition with other organisations in the digital space. From a financial capability perspective, the online marketplace is a crowded one, and contains variety of actors which arguably range from commercial comparison sites to the government’s own DirectGov service (which allows users to access information about issues such as tax, benefits and pension planning). Another player, particularly notable for its strong user-base and brand identity, is

15. If it is to succeed in the digital arena, MAS is likely to need to expend substantial resources on advertising and marketing, in order to drive traffic and take on more established brands. Given that the concentration of online providers means that there is significant potential for unnecessary duplication, we would question the wisdom of such expenditure. Moreover, given that these advertising and marketing costs will need to be factored in to the cost per individual reached, we question whether digital ultimately represents the most cost-effective mechanism for reaching consumers.

16. As discussed earlier in paragraphs 2 to 7, we believe that MAS there are alternative (and in our view more effective) ways in which MAS could fulfil its statutory objectives – these would avoid the need for MAS to compete with established digital players.

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?

17. As we understand it MAS’s target audience is very broad, and it has essentially positioned itself as a mainstream service. The nature of MAS’s marketing and advertising appears to mean it will attract that section of the market who might otherwise turn to Independent Financial Advisors. Ultimately, it is difficult to say that MAS is not reaching its target audience, precisely because that target audience is so general. However, as we have already highlighted in the course of this response, MAS’s decision to adopt a universalised digital strategy means that there may be certain groups that it will be unable to reach. The fact that MAS does not offer services specific to particular users, or pursue delivery mechanisms aimed at particular audiences, means that its capacity to reach more difficult-to-access groups (who are frequently the most vulnerable) is likely to be highly restrained.

18. To some extent, this takes MAS away from the original vision outlined in the Thoresen Review of generic financial advice. The Review contained the initial proposal for a generic financial advice service, then labelled Money Guidance. Significantly, it stated that while the service should be universal, a range of delivery channels would be necessary to reach everyone. In summarising the lessons learned from pathfinder projects, the Review stated that "Money Guidance appeals to a broad mix of people. A mix of channels can effectively appeal to different types of people and a cross-section of needs … Specific groups, particularly the vulnerable and young, may require targeted engagement, to make them aware of the benefits of Money Guidance." [1]

19. There will, unavoidably, be people who are unable to access MAS’s services altogether due to the fact that delivery is predominantly online – those who are digitally excluded are one key example. Furthermore, while MAS will notionally be available to anyone with an internet connection, this does not guarantee the widespread use of its services. As well as those groups who may be better served through alternative channels, even mainstream users may not utilise MAS, as its impact as an online service will be heavily contingent on the success of its marketing and advertising activities. Users need to make an active decision to visit the MAS site, meaning that those who do not respond to national advertising campaigns, or who simply choose to utilise another online service, are unlikely to use it.

20. Turning to the issue of who is worst affected by a lack of financial knowledge of financial matters, this is in many ways a difficult question to answer definitively, as people across the income and age spectrums can find dealing with their personal finances challenging. It is, in our experience, difficult to make generalisations about particular groups in this regard as an individual’s level of financial capability is something that is very much specific to them. The financial demands placed on people also evolve through their life-cycle, meaning that someone who is financially capable at a young age may find that, when they get older, they may not have the skills and knowledge necessary to meet a different set of needs.

21. In essence, anyone could need support in building their levels of financial capability at any point in time. However, returning once again to the issue of delivery, the most effective channels for reaching people with messages about financial capability do not stay the same over time. The ideal mechanism for reaching a retired person will not be the same as the ideal mechanism for reaching a secondary school student.

22. Finally, with respect to financial education in schools, it should be recognised that MAS is reaching out to wider providers and involving them in decisions about what sort of role it should play – indeed, this is probably the one area in which MAS’s stakeholder engagement has been good. Our view is that there is little need for MAS to undertake direct delivery in schools, as there are already a range of organisations which do this very effectively. However, the need for this work continues to be extremely high. We therefore believe that the MAS should consider providing some level of funding to other third-sector providers. For example, we deliver programmes to students in both secondary schools and colleges, while other providers (such as the Personal Finance Education Group and MyBnk) also play an important role.

23. As well as strategic funding, we believe that MAS could be most effective if it also took on a co-ordination and thought-leadership role, in order to ensure that any work undertaken by existing providers complemented other initiatives as far as possible. This would be in line with the general approach we have already outlined in paragraphs 6 and 7.

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

24. While we have questions over the strategy that MAS is currently pursuing, we are generally supportive of the levy model that is currently used to raise funds, and believe that it is appropriate for the financial services industry to support financial capability initiatives.

25. We understand that the current level of funding generated by fees raised from financial services firms is in the region of £46 million. As far as we can see, the only other option for generating anything close to this amount of money specifically for the provision of financial capability initiatives is through direct funding by central Government. Given the current level of constraint on the public finances, we think it unlikely that the same degree of funding could be maintained through such alternative means at the present time.

26. That said, we believe that if the levy is to be maintained, MAS should do more to consult and listen to the financial services industry, in order to try to reach a consensus on how the funds should be used.

June 2012

[1] Thoresen Review of generic financial advice: final report (March 2008), p. 20

Prepared 21st June 2012