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Comment: April 2008

Money Guidance

The Chief Executive of Aegon, Otto Thorensen, has completed his fourteen month review of generic financial advice and has developed a concept which he calls ‘Money Guidance’. The idea is that there will be a free service available to the public which will offer a combination of telephone, internet and face-to-face guidance. The FSA will shortly launch a two year trial which will be called ‘Pathfinder’. The FSA will direct strategy, set standards and deliver some services but much of the service will actually be delivered by accredited partner organisations such as the Citizens Advice Bureau. Various other organisations, charities etc. have volunteered to be involved. Presumably everyone will hold a minimal FPC type qualification? Begging to be included - straining at the leash - are the banks and large life assurance companies. What a selling opportunity this would be for them!


 

Somewhat unrealistically in our view, Thorensen has said that life companies and banks will have to ‘prove their impartiality’ before they can offer Money Guidance. This sounds a bit like telling wolves they will have to prove that they do not like the taste of sheep. The cost of Money Guidance will be shared between the Government and the Financial Services Industry. This is expected to translate into an increase of 4% in FSA fees for regulated firms. A big moral problem we see here is that if ‘proper’ advisers have to increase their client fees to fund yet more FSA levies, then their paying clients will effectively be cross-subsidising people who do not want to pay for advice.

Thorensen is determined that the Money Guidance should be ‘principled’ and recommends it should be:

  • On the side of the consumer

  • Supportive of individuals

  • Preventative – as the service is preventative not curative - it is not designed for those in crisis

  • Free and available to all

  • Sales free - information only to be given

We are highly sceptical of this initiative, but very much hope to be proved wrong. There are two main areas of concern. First, however much publicity is generated, at the end of the day, Joe Public will have to take the initiative - pick up the phone, log on to the internet or whatever - in order to seek advice. Will he? We suspect not, any more than he was proactive when Stakeholder was launched.

Second, the banks, large building societies and large insurance companies will fall over themselves to become involved, with no altruistic purpose what so ever, but simply trying to generate angles whereby they can encourage people to buy their products. As so often in the past, we feel that this project, while festooned with good intentions, was conceived by people who do not really understand how the world actually works. In a few years time, it is likely to be declared a huge success, then quietly wound down, or radically changed, having cost a great deal of money and achieved very little.

The above is the lead article in our monthly CPD Digest. Please click here for information about the full Digest.
 

 
 
 
 

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