Richard Walsh discusses the likely changes to the Money Advice Service in the coming year
A new year is a good time to look ahead at any changes that might be in the offing. I suspect the Money Advice Service (MAS) will be subject to some such changes. The gestation period has been lengthy.
In May 2014 the government launched the Independent Review of MAS led by Christine Farnish. The report was published in March 2015, just before the last election along with the coalition government's response.
However, it was clear from its response that this was not the end of the matter. In addition, we now have a new government: one that is less keen on state interventions than the previous one.
So what do we know? First, MAS is the largest single provider of free debt advice in the UK, and the review noted the strong progress MAS has made in this area since it took it on in 2012. Oddly, debt advice is currently funded by a levy on all FCA-authorised financial services firms.
From 2015-2016, this funding base will expand, because for the first time it will include firms authorised by the FCA for consumer credit activities (a much more appropriate source of funding). Also, the utilities industries will contribute to the funding of MAS debt advice.
Research carried out by MAS in 2014 found that utilities debts were cited as a concern by 40% of clients: up from 24% the previous year. HM Treasury and the Insolvency Service are currently undertaking an in-depth review.
In my view two things need to happen. First, MAS should continue its very effective role in providing debt advice. And second, the funding for such advice should come solely from those organisations identified as contributing to the problem (ie, the general levy for this from all financial services firms should cease.)
Next we move to MAS's other functions on money advice. The Farnish review noted that there is a crowded market for providing money information: ranging from IFAs to comparison websites.
But rather than bite the bullet and get rid of this function, MAS was tasked with filling gaps where there is an identified need, and scaling back direct delivery where there are doubts over its impact, or where there is duplication.
In essence, it should position itself as a strategic coordinator of other sector organisations or firms, to leverage the reach, resource and expertise of others.
When the government consulted on pensions advice it decided to appoint the Pensions Advisory Service and the three Citizens Advice bodies as the delivery partners for the telephone and face-to-face channels respectively: not MAS.
MAS is already assessing what kind of business it will need to meet its new objectives: in terms of size, budget, skillsets and delivery mechanisms. It will be interesting to see how radical these are.
The challenge for government is to define a new statutory remit for MAS in the context of future plans for Pension Wise and of wider developments or interventions in the landscape for impartial financial information and advice.
I suspect we will have to wait until the Budget before we know the future of the money information element of MAS's new responsibilities. It will keep debt advice, but whether it really has any future role in general money advice is very debatable.
In my view, the best way forward in this area is not a state organisation. Instead it is an effectively regulated private sector. The FCA's comments on reducing the crackdown on commission may well be relevant too.
Richard Walsh is a fellow of SAMI Consulting (www.samiconsulting.co.uk)
