The Thoresen Review of generic financial advice has received little coverage despite its potential c...
The Thoresen Review of generic financial advice has received little coverage despite its potential cost and ramifications. At its core is the proposal for a national Money Guidance (MG) system, which will be impartial from Government and the financial services industry to support people when budgeting. It will not cost the user anything and will be sales free. It will be delivered by a central body with a MG-accredited partners for face-to-face, web-based and telephone communications. It is not intended for those in a crisis. They will be referred to existing organisations such as the Citizens Advice Bureau.
It will be tested initially in a pathfinder project which will take up to two years to complete and cost up to £12m. This cost will be split between Government and the financial services industry. Assuming the pathfinder is successful, the cost for the full scheme will be about £50m a year. These costs are said to be outweighed by the benefits to the industry, consumers and society, but they will ultimately fall on policyholders and the tax-payer.
MG will provide guidance on a suggested course of action. For example, it will suggest to a new parent "most people in your situation consider life cover". It will then give information on the pros and cons of different types of protection insurance and guide the consumer to price comparison tables and/or refer them to regulated advice. If MG has the coverage expected, this will raise some interesting questions. For instance, the report does not rule out recommendations to change or surrender products in general - only specific products from specific providers. One wonders how some exiting mortgage payment protection insurance providers will fare in this environment. Overall, given the huge protection gap, MG should be good news for insurers. As for financial advisers, I am less confident. Having already been initiated into the world of protection, I suspect many potential applicants will go straight to price comparison websites rather than seeking tailored advice.
But who is going to deliver this service? It recommends that MG be an arm of the FSA. Of course this may reflect the timing of the original drafting, but in this context most consumers think of Northern Rock. In any case, the FSA is a regulatory body and although it has consumer facing functions, these hardly merit the superlatives given to them in the review as 'a world leader in financial capability'.
The Government should think again on this point.
- Richard Walsh is managing director of SPPR Consulting.
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