HC 271 Money Advice Service

Written evidence submitted by Which?


1. 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?

Which? believes that consumer outcomes will be enhanced by the provision of generic advice through a trusted intermediary. Enhanced consumer confidence and understanding could lead to better consumer decision making and consumers that feel more capable of making purchasing decisions. This is why we supported the creation of the Money Advice Service and why we think the body is important to improving consumer outcomes in financial services.


The Money Advice Service was founded in April 2011 and has undergone significant internal re-engineering from the pre-existing Consumer Finance Education Body (CFEB) structure. It may be too soon to evaluate the extent to which the Money Advice Service is fully meeting its core statutory objectives given its newness and concentration on internal formation. We believe that the structure should be given time to bed in, and the organisation an opportunity to work under this new operating structure before passing a judgement on the extent to which they are fully meeting their objectives.


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

The statutory objectives of MAS are;

Enhance the understanding and knowledge of members of the public of financial matters (including the UK financial system), and

Enhance the ability of members of the public to manage their own financial affairs

These are broadly the right objectives for the MAS . In a changing world where consumers need to interact with the financial services market more frequently, and where the transfer of risk and responsibilities from the state to the individual for self protection are evident, the creation of better equipped consumers is crucial. That transfer of responsibility creates risks for the consumer which can be mitigated by effective money guidance. The MAS should help individuals understand their current financial position, their available choices, and how to take further steps to meet their needs. It is important to note that this may not always result in the purchase of a financial product though – indeed in some cases it could result in consumers taking action such as paying off debt. MAS could also be given specific objectives surrounding major public policy changes such as the introduction of automatic enrolment and to help consumers understand the process and choices available. However, it will be important to prevent mission creep, and any tendency to simply replicate what is already available within the commercial and not-for-profit sector. MAS are in a position to provide services that commercial providers may not be willing or able to offer and should not be drawn to duplicate existing services provided elsewhere. To do so would be to raise questions of the efficient use of resources and the inevitable likelihood of provision replication.


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


We agree with the current accountability mechanisms where MAS are accountable to Parliament through the Treasury Select Committee and an annual report to Treasury ministers. We believe that these accountability mechanisms are appropriate and provide a good framework for assessing the effectiveness of MAS. It is vital that MAS remains independent and at arms length from the Government and the financial services industry so that it can remain trusted by consumers and is a credible resource for independent advice. Any attempts to strengthen accountability mechanisms must be mindful of that.


At this stage, we would expect MAS to have clear metrics and management information in place and be able to explain how at the end of its budget period it will be measuring whether it has achieved its stated objectives and its priorities. This should include measures about what action consumers took as a result of the information MAS provided and their views on the quality of the information provided.


It is inevitable and also right that MAS demonstrate they are providing value for money for the services they provide. In order to maintain the confidence of the public, who are ultimately their funders, there must be a value for money assessment of their work. While the MAS is funded by an industry levy through the FSA the cost will ultimately be borne by the consumer.


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


There are a number of organisations, including Which?, who provide services that cross over with those provided by the Money Advice Service. These organisations include Citizens Advice, Money Advice Trust, Personal Finance Education Group, Consumer Credit Counselling Service, National Debt Helpline or MoneySavingExpert.com. In addition, the personal finance pages of national newspapers comment regularly on issues and offer tips and advice. This demonstrates the wide range of sources available to consumers to get advice on money issues, and how confusing it can be to find the right source of information. In this regard, the Money Advice Service plays a role as an independent, authoritative and respected brand. However, in doing so it must add value not simply replicate what is on offer elsewhere. It must guard against mission creep, and any tendency to simply replicate what is already available within the commercial and not-for-profit sector. MAS must concentrate on offering products and services that are not provided in the commercial and not-for-profit sector. In that context Which? is keen to ensure that face-to-face and telephone services are regarded as a central part of the MAS offering.


6. 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?


In the MAS business plan the target market is identified as, ‘Our target market is those people who are not well positioned to withstand unexpected life events, in particular those who do not have adequate savings or insurance.’


In their 2012/13 Business Plan MAS set a target to reach 11.3 million people a year by 2016/17. Their immediate aims are to reach 1.9 million people in the year 2012/13 including 88,000 via face-to-face advice and 90,000 through their contact call centre. This preponderance via online channels is likely to be the most cost effective channel but not necessarily the most accessible for all consumer segments.


While the internet will be the channel that allows the Money Advice Service to reach the largest number of consumers we think that face-to-face and telephone advice also play a critically important role for those in the most need of financial advice. We would like to see the Money Advice Service guarantee that they will always provide face-to-face and telephone advice, alongside the tools and services provided on their website, and that their resources are allocated to meet the needs of all channels.


Although the majority of people will access the Money Advice Service through their website there will be some groups of people without access to the internet who are unable to access MAS’s services. For these groups it is even more vital that the face-to-face and telephone services remain. MAS must reach those unable to access the internet as well as those most in need of help and support with their finances.


It is arguable that the worst affected by a lack of knowledge regarding financial services issues are those who are in financial difficulties or in debt. Therefore, we understand that the role MAS has recently taken on to co-ordinate debt advice across the UK is designed to target their resources appropriately and at those with the highest level of need.


We believe that there is a positive role for MAS to play in financial education in schools. MAS have a huge level of resource, knowledge and expertise that could be utilised to improve financial education in schools. For example, partnerships with organisations such as Personal Finance Education Group (PFEG) would allow the MAS to increase its reach and improve levels of financial capability in schools and colleges. We would support the use of resources in this area.


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


Regardless of the model by which MAS is funded we think it is vital that MAS remains free at the point of use for the consumer. If a charge is made this could well exclude those people who are most vulnerable and would most likely benefit from such a service.


With regards to the funding model we think that the current arrangement where the service is funded by a levy on the industry is appropriate. Ultimately, this means that consumers pay for the service through payments for services. Alternatively, this could be a service funded by Government.


June 2012


Prepared 15th June 2012