This week, the government’s free Money Advice Service has gone live after several months of delays and budget cuts. The service, which is a re-branding of the old Consumer Financial Education Body, will give free, independent financial advice to anyone in the UK online, over the phone and face-to-face through a national network.
The re-launch has followed turbulent months for CFEB, which was created last April by the FSA. The government had announced that the body’s funding was cut in November by £12.5m and the CEFB was forced to push back the launch of the new website. The idea of the Money Advice Service came about two years ago following the then AEGON CEO Otto Thoresen who produced a credible report on the possibility of delivering a national approach to generic financial advice, recommending a free national advice service to help consumers with money matters. A change of government later, a bit of faffing about and the baton has been passed from the FSA to the Consumer Finance Education Body (CFEB) to the new Money Advice Service.
Aimed at being complementary to the financial advice industry, Money Guidance pilot schemes have been running in 37 priority areas across the UK and provide a simplified, first-step service for people who may never have previously sought financial guidance. The pilot schemes have gone down well and it appears there is a demand for this personalised online advice service across a broad section of society. Almost three-quarters of users took action after using the pilot service. This new service now needs a targeted and integrated marketing approach over the next few months to drive awareness which be a major factor in the success of the service. And it is completely sales-free.
Laudable though this is, where does leave financial advisers? IFA reaction in the press to the new service has been mixed, some welcoming the new service as “a great initiative” while others saying it could be an FSA sponsored plan to see the end of the IFA for the mass market. Endless column inches over the past months have been devoted to the issue of financial advisers being ‘forced’ into charging fees post 2012 when the RDR regime takes effect, a result of which will undoubtedly mean fewer people willing or able to go to an adviser for help with their financial affairs.
What is probable is that advisers will be left to forage in the HNW market for future clients. With fees of around £100-£200 an hour, this is likely to put off all but those with particularly complicated financial affairs. And this is just how most advisers want it. Why go through this huge rigmarole of being RDR-compliant and then have to deal with the bloke down the road with only a £10,000 Isa? Thus, nearly all the ‘RDR-friendly’ firms’ business models appear to be aimed at the wealthier client, while totally ignoring a huge swathe of the population. Which is where the Money Advice Service comes in. But is the public clamouring for such a service? You only need to see the apathy that greeted stakeholder pensions in 2001 and a seed of doubt is grown.