At the end of May the economic secretary to the Treasury, Andrea Leadsom, launched an independent review into the Money Advice Service, led by former consumer director at the Financial Services Authority, Christine Farnish.
Here we outline five of the most important points and questions contained within the review’s call for evidence, published today (3 July).
1) The statutory objective is too broad and in need of re-definition
Andrew Tyrie, chair of the influential Treasury Select Committee, said earlier in the year that Mas’s statutory status must be reviewed. In particular, the TSC wanted the review to include whether Mas should exist as a statutory body, and whether its governance arrangements are sufficiently robust.
Mr Tyrie got his wish as this is a main focus of the review.
The 2010 Act requires the consumer finance education body to work to enhance the understanding and knowledge of members of the public of financial matters (including the UK financial system); and the ability of members of the public to manage their own financial affairs.
Mas has interpretated this to mean it should focus on ensuring people are financially resilient and able to cope with life’s financial ups and downs; and for those who fall into crisis debt, increasing access to and availability of high quality debt advice that is of a consistent high standard.
The review therefore asks what priority consumer outcomes should Mas focus on and whether the assessment of its target market is correct.
2) Funding issues abound
As readers will know, Mas is entirely funded by an industry levy which authorised firms, payments service providers and electronic money issuers contribute to.
The FCA collects and consults on the levy annually, with the levy apportioned separately to its dual roles of providing consumer financial education and channelling funding for debt advice. The budget for 2014/15 is a whopping £81.1m, split between £43m on consumer financial education and £38.1m on debt advice.
This follows on from its previous budget for the 2013/2014 year where it was £77.5m.
In December, the TSC delivered a scathing report, stating that Mas appears to be overly expensive and providing a redundant service that duplicates that already available in the market making it unlikely it will be effective in filling the ‘advice gap’ for mainstream consumers.
Around the same time, a National Audit Office report found that Mas’s provision of generic money advice is not yet achieving value for money.
Does Mas allocate and spend its money to best effect? It wants to hear your views.
3) Whether Mas gets involved in early financial education needs to be decided
The role of Mas in providing education in schools, including the training of teachers, is subject to particular debate.
Currently, it does not provide direct education in schools, as other organisations are active in this area, but does provide materials for parents, school leavers and practitioners working with young people, where it considers there to be more of a gap in the market.
One significant development is that financial education will now form part of the National Curriculum for maintained English secondary schools from September this year.
The call for evidence notes that the wider landscape for the provision of consumer financial education and debt advice has evolved significantly over the past 10 to 15 years, with a lot of guidance funded by the financial services industry either directly as part of its everyday dealings with customers, or on a commercial or voluntary basis to third parties.
4) Questions around the coast and scope of the digital strategy
According to the review, new digital tools provide the opportunity to reach and engage consumers in cost-effective and convenient ways, and existing digital channels such as webchat finding further take-up through mobile devices.
Mas says it has taken on a ‘digital first’ approach, investing £54.5m since establishment ondeveloping a web based platform and raising public awareness of its services.
Mas has also “invested significantly” in its website, particularly through the provision of online content and tools, with a new platform recently launched for mobile devices.
In its business plan, published in December 2013, Mas revealed it was cutting almost £1m off its budget for telephone and web chat services, noting that it is “working on a channel shift”. In contrast it added £546,000 to its budget for delivering face-to-face sessions and £346,000 to its digital budget.
Mas, as well as the Pensions Advisory Service, have been widely touted as firms that are well-placed to deliver the chancellor’s guidance guarantee. Many respondents have suggested that it will have to delivered digitally/virtually as face-to-face will be far too costly and not everyone will need face-to-face advice.
Mas wants to hear your views as what potential digital technology and social media have to drive further behavioural change.
5) Keeping up with new regulation and legislation is a challenge
The review concedes that the regulatory framework for financial services has continued to evolve alongside the establishment of Mas.
Following the radical pension reforms announced at the Budget, the review will also consider whether any appropriate refinements should be made to Mas’ approach and focus after the government has published its response to its consultation on the guidance guarantee.
The call for evidence asks what the needs of consumers in the decumulation phase of their lives are and will be, given the changing nature of retirement itself and the evolving retirement income market.
The review closes on 2 September.
