HC 271 Money Advice Service

Written evidence submitted by the Association of British Insurers

The ABI

1. The ABI is the voice of insurance, representing the general insurance, investment and long-term savings industry. It was formed in 1985 to represent the whole of the industry and today has over 300 members, accounting for some 90% of premiums in the UK.

Summary

2. The ABI fully supports the continued existence of the MAS as an independent organisation, and the objectives that it has set out to achieve.

3. The nature and scale of these objectives mean that it is too early to evaluate the success of the MAS. We do have some concerns around low levels of MAS accountability and transparency, and the limited opportunities to date for the industry to work collaboratively with the MAS. However, we recognise that recently MAS has been working to improve its engagement and transparency with the industry and other stakeholders. This is welcomed, but further progress is needed in transparency, accountability and working together in order to build industry confidence in the approach the MAS is taking to achieve its objectives.

4. The MAS and the FSA need to clarify their relationship, specifically how the MAS accounts to the FSA and how their consumer education and communication roles will work together so that overlaps or gaps in coverage and inefficient use of resource can be avoided.

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?

5. These are challenging objectives on changing consumer attitudes and behaviour so it will take some time before progress can be fully assessed. However, we would like see much greater transparency and accountability from the MAS, particularly around how they are using their budget – provided by the financial services industry – to achieve these objectives.

6. Although there have been notable improvements in recent levels of communication and engagement with industry, the MAS needs to go further in explaining to the insurance industry and other stakeholders what they are currently doing and plan to do to meet their objectives, the rationale behind their decisions, and how their effectiveness is to be reported and evaluated. The lack of this information undermines industry understanding and confidence about how effectively MAS is working towards meeting its core objectives.

7. We are concerned about the lack of clarity on the respective roles, responsibilities and plans of the FSA/FCA and the MAS with regard to consumer communication and education. Clarification would help both MAS and industry to better assess and build the effectiveness of the MAS.

8. The ABI is keen to work proactively with the MAS to support them in achieving their objectives and ensure the effective and efficient use of their resources. Our concerns around MAS governance could be addressed by a more engaged and active board that is open, transparent and consultative with industry and other stakeholders, for example through the budget and the business plan.

Are these the right objectives for MAS to have?

9. Yes. We strongly support the creation of this independent body to address the very important challenge of increasing consumer engagement, understanding and confidence in managing money and using financial products.

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

10. We do not have sufficient information to be able to assess the effectiveness of the MAS’s internal administration and expenditure on staff and other resources. More openness and transparency from the MAS in sharing information will enable us to better understand and put in context the investment in the MAS. Not having access to this information leads industry and other key stakeholders to make assumptions that may be inaccurate and has a negative impact on how MAS is regarded.

11. We recognise that the MAS is going through a substantial transformation and current arrangements are therefore temporary. We would welcome clarity on how and when the MAS plan to move to a permanent structure and resource base. For example, information about the extent to which outsourcing and consultants are being used at present, and will be used in the future, along with an explanation of how MAS have concluded this is the most cost efficient use of budget.

12. The ABI recognises that the recent MAS acquisition of the Debt Advice Service will add to the challenges it faces in managing the transition to a new permanent structure. However, However, industry would welcome clear information as to how resources are being deployed across the full range of MAS services, and how the delivery of debt advice will impact on other MAS objectives.

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

13. Currently the FSA must sign off the MAS budget and business plan, the published version of which is sparse on detail so offers very little accountability. Given this limited information, the ABI is not confident that the current process provides effective accountability or governance. The ABI would like to see the regulator run a full consultation with industry and stakeholders about MAS priorities before any budget and business plan is approved. This would provide useful guidance to the MAS as to how it could prioritise and direct its work, build industry confidence in the MAS’s governance and accountability, and facilitate industry input and collaboration in supporting the MAS in achieving its objectives.

14. Further clarity and work as to how the regulator assesses, challenges and approves the MAS business plan and budget would be welcomed. There may be a role in this process for the National Audit Office to assess the efficiencies of the MAS.

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

15. The Thoresen Review anticipated that the MAS would play a central role in facilitating projects and ensuring a comprehensive provision of advice in one place. There is evidence of this in practice, with many organisations now signposting to the MAS. Some degree of overlap is inevitable and unavoidable due to the range of voluntary, public and private bodies involved.

16. However, there is still concern that the MAS may be doubling up on consumer advice services provided by other organisations such as the Citizens Advice Bureau. The MAS must ensure it is using its resources in a way that limits any duplication or overlap to an unavoidable minimum. The outsourcing to the Citizens Advice Bureau of the recently acquired debt advice service provides a blueprint to how this could work in practice. The ABI also understands that the MAS is developing effective signposting for users between itself and other complementary organisations or resources, which we welcome.

Is the MAS reaching its target audience? Are any groups unable to access the MAS’s services?

17. The MAS has a wide remit which covers a variety of audiences with multiple needs. This, coupled with lack of transparency, makes it hard to evaluate how effectively MAS is reaching all of its target audiences. More transparency as to who is using MAS services would help MAS and the industry work together further to widen the reach and impact of MAS. We welcome MAS plans to measure the extent to which consumers take action as a result of using their services, and to use this to review and refine services.

18. MAS has been criticised for focusing on providing online access for consumers. Face-to-face and telephone services are also provided and are very important, especially for consumers who for various reasons have limited use of online access. However, it has to be remembered that both of these are much more expensive to provide than online advice, and any expansion of these services would need additional resource. It is important that the MAS achieve an effective and efficient balance in using its budget to achieve the greatest impact.

19. There remains some concern about the public’s understanding of the nature of the service provided by the MAS relative to regulated personal financial advice. The distinction between generic advice and regulated personal advice may not be understood by the public and could lead to frustration, confusion and disengagement with MAS services. More work needs to be done on providing clarity as to what services the MAS can provide and why, and signposting audiences to regulated personal ‘financial advice’ as and when necessary

20. Although the MAS does not provide regulated personal ‘financial advice’, the ABI believes the MAS can and should provide more action-oriented tools and guidance than is currently offered. This is especially important as it has been proven that audiences are more engaged when information is linked to an action. For example, the Financial Health Check is a good starting point to help people work out their personal financial needs, but consumers often need further guidance to take action. The ABI is keen to work with MAS to support the development of tools that guide consumers through the process of making decisions and taking actions to meet their financial needs.

21. The MAS must ensure that the information and guidance it provides is entirely objective and unbiased, giving consumers the information and support they need to make their own judgements about how to use financial products to meet the needs the MAS helps them to identify.

Who is worst affected by a lack of knowledge of financial matters? Should the MAS have a greater role in financial education in schools?

22. To date, the MAS has focused on providing advice for adults over the age of 16. We are aware that some parties want the MAS to focus more on financial education in schools. Whilst we strongly agree that more financial education in schools is needed, we believe that the responsibility for this lies primarily with the Government / Department for Education and should be delivered through the national curriculum.

23. Consideration could be given to support that MAS could provide to the Department of Education and PFEG (the Personal Finance Education Group) in developing curriculum in this area, and coordinating the wide range of work already on-going in the industry around increasing financial awareness and engagement among school children.

24. However, any additional responsibility or workload taken on by MAS in relation to school education would require additional resources and budget, which we would expect the government to provide.

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

25. The financial services industry accepts that it has a responsibility to support provision of the services to increase financial engagement, capability and confidence. However, this responsibility should not fall on the financial services industry alone. The Thoresen Review envisaged there would be a Government contribution towards the MAS, which has not materialised.

26. Achievement of the MAS’ objectives will have positive impacts far wider than financial services, building a more financially confident, able and resilient society. For example, it will contribute to consumers making better use of other industries’ services and products such as utilities. The ABI therefore believes that Government and other industries (e.g. utility companies and payday lenders) should also contribute financially to the MAS running costs

May 2012

Prepared 15th June 2012