OpinionDec 6 2013

Mas under siege, but ‘advice’ elephant in the room remains

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It’s been a rough week for the Money Advice Service. Seeing them humiliatingly dragged through the muck almost makes you feel sorry for them, doesn’t it?

Hello? Anybody?

On Tuesday the Treasury Select Committee dropped the first bomb when it came out heavily criticising the Mas as providing a service already available to consumers and incurring whopping costs in the process.

MPs said the service would not be effective it mitigating the apparent ‘advice gap’ - and went so far as to recommend evaluating if the service should be scrapped altogether, or at least seriously re-purposed, but then reneged owing to the existing Treasury investigation.

The TSC also cast doubt on the objectivity of the previous two-year review launched by the Treasury and called on a second, independent review to scrutinise the service.

The Money Advice Service’s somewhat dismissive response to this was simply, “but don’t you see we’ve changed?”. It argued that the information relied upon by the TSC was out of date and that it is already doing the things the Committee recommended.

Next Mas hit headlines for the wrong reasons again when it was forced to admit that misleading wording on its website encouraged people to pursue spurious complaints.

A Mas spokesperson confirmed to FTAdviser sister publication Financial Adviser that it had “revised” advice for consumers with endowment mortgages so as not to mislead them over the timeframes involved, having previously said borrowers could complain any time after receiving a shortfall notice from their provider.

Finally, with impeccable and hilarious timing, the National Audit Office sauntered into the fray to remind Mas it must work more closely with financial advisers, as it too launched a fairly scathing critique.

Clearly sentiment has turned against this laudable but expensive and ill-judged venture, but for advisers the elephant in the room remains: none of these reports criticise the use of the word ‘advice’?

Given all of the RDR changes that have tied up advisory services in red tape and increased barriers to entry, not least by ensuring the service cannot be described as free, it still seems wrong that consumers are being told Mas offers ‘free, unbiased advice’.

The horrible irony is Mas is not even free: those who do take regulated advice ultimately bear the cost in their charges, which fund the fees adviser firms pay that in part fund the service.

Making a Statement

In case you missed it, chancellor George Osborne this week made a minor financial announcement called the Autumn Statement.

I’ll be frank. Our coverage was so extensive that I can’t bear the thought of going into too much detail here - and most of it was pre-announced anyway - so let me just quickly cover a couple of the main points.

Overall it was a good statement for small businesses, and a bad one for 20-somethings who were looking forward to taking their state pension before turning 69, although one commentator argued the state pension age might not actually be rising quickly enough.

Mr Osborne seemed keen to avoid a housing bubble by increasing funding for new construction, and he continued his crackdown on naughty, naughty tax avoiders.

One detail of note emerged from the supporting documents - that’s where all the good stuff is - which suggested the door might be slowly opening for venture capital trusts to be placed on platforms.

Click here for a handy PDF of everything you need to know from the Statement.

Why are we still using that word?

‘Superclean’ just doesn’t make any sense any more and I wish we could just drop that term. Unfortunately it looks like it’s here to stay despite having such a woolly meaning.

This week a report from Barclays identified Sesame, St James’s Place, Openwork and Intrinsic as the four “possible winners” of the RDR and the subsequent shift to superclean share classes following the ban on platform rebates.

Note that two of these firms are restricted and Sesame is headed that way.

This is a disturbing note for IFAs, especially after it emerged that asset managers might demand guaranteed distribution in exchange for discounted rates, and might therefore be inclined to go straight to restricted advice firms rather than through platforms.

Think about it: a restricted firm doesn’t have to apologise for having a narrow range of options so is in a better position to promise or imply more investment through the use of limited panels, meaning they might have more negotiating power than IFAs when it comes to securing better rates.

So how can a small-business IFA compete with their restricted cousin down the street who is bragging about their cheaper rates?

Well, not to worry. One adviser I spoke to made the interesting argument that IFAs could simply advise clients to go direct to fund groups. He thinks if fund groups don’t match the rates they are giving to restricted firms they might be in breach of the Conduct of Business Sourcebook.

The plot thickens.