I am pleased to submit the Money Advice Service s response to the Independent Review of the Service.

Transcription

1 20 March 2015 Andrea Leadsom MP Economic Secretary to the Treasury 1 Horse Guards Road London SW1A 2HQ Dear Minister, I am pleased to submit the Money Advice Service s response to the Independent Review of the Service. General The Money Advice Service welcomes the Independent Review s report on how to strengthen the Service. Crucially, the report recognises that consumers need support to make good financial decisions. It recognises the differing needs of consumers including those millions of people who need help to overcome problem debt and many more who need help day to day to manage their financial affairs and understand how different products can help them. The Review recognises that the Money Advice Service has two important functions: helping people who face problem debt get the help they need, and helping consumers understand financial services and make better decisions. The Service is committed to rising to the challenges posed by the Review, to ensure it is most effectively and efficiently meeting different consumer needs. Like any organisation the Money Advice Service needs to evolve to meet changing consumer needs and circumstances the world is a different place now from when it was set up in 2010 to be the primary source of free generic advice. There are now many more sources of free advice, primarily online, and many more products competing for consumers attention. Legislative and policy changes are having a big impact in areas such as pensions and benefits. Although demands on people s finances are increasing and new sources of information have appeared, there is little or no evidence that the ability of less advantaged groups to engage with financial issues has grown in line with the demands placed upon them as shown by growing numbers of people falling into unmanageable debt. Inertia, short-termism and lack of confidence are still significant barriers which need to be overcome, to enable more people to make well-informed choices and take the action needed to manage their money. We welcome the direction of the report. We agree with many of the specific recommendations, especially further strengthening our role to co-ordinate the debt advice sector and accelerating our collaborative approach to working with the 1

2 financial services industry on money advice. We are taking immediate steps to move these recommendations forward. Some of the recommendations call for major changes to the Service s money advice work. On these, working closely with the Financial Conduct Authority (FCA) and keeping HM Treasury (HMT) closely informed, we will carry out more detailed work on consumer advice needs in the current market place, how we and the wider sector can meet these and the practicalities of implementing the changes suggested by the review. The over-riding test, in all circumstances, is what will deliver best for the consumer and provide value for money for the resources available. Finally, we query the basis on which some of the Review team s calculations around costs have been made including website costs as highlighted in the report. Our response to key issues is outlined below. Debt Advice (Recommendations A1 A5, A7 A9) The Service agrees with the recommendations around strengthening the debt advice sector and we will be working with our not-for-profit debt advice partners, major providers of credit and other creditors to see these recommendations implemented. We are particularly pleased that the report recognises the significant progress made by the Service and its partners to support consumers who need free debt advice. We welcome the additional funding from energy and water companies secured by the Review team to support our debt advice work. As the report recommends, we will convene and chair a new Debt Advice Steering Group. We will shortly publish the terms of reference and membership of this group, with a view to holding the first meeting in the first quarter of 2015/16. We will invite the chief executives of the major debt advice charities, as well as the senior figures from creditor groups, including banks and utility companies, to sit on this important group. This Steering Group will help us reach agreement on new initiatives to support the sector, including effective triage, and also make sure funds are deployed as effectively as possible. Changes to the Service s direct money advice role (recommendations A6, A10, A13 and A16) The report calls on the Service to reduce its marketing spend and focus on other ways to engage consumers, such as through joint campaigns with industry and media. This chimes in closely with our own recent thinking, although we must remain mindful of the need to reach those people who are most disengaged with their finances. 2

3 In particular, given the instrumental role our marketing activity has played in raising awareness of the Money Advice Service as a place that consumers can turn to for support, we are now in a position where we can reduce significantly our marketing spend in 2015/16. The report also raises some challenging questions about the extent to which we should be a direct deliverer of advice when consumers can now access free advice from many different online sources. This is a legitimate question. The report suggests changes to our operating model. It calls on us to offer generic money advice only where there is a clear gap in the market, otherwise we should signpost consumers to other organisations that can provide appropriate advice. To support the proposed business model, the report recommends a series of detailed measures: that we should recast our website; accredit other providers with a quality mark ; rebadge our money advice telephone and face-to-face service as debt advice ; and provide a new telephone service that offers more technical support on financial products. These recommendations would represent major changes to our money advice work. They also raise some complex questions and potentially difficult trade-offs. Working closely with HMT and the FCA, we need to fully understand how implementation of these recommendations would be consistent with meeting consumer needs and ensure that there remained trusted and impartial places to which consumers could turn for advice. Therefore, in 2015 we will lead a thorough assessment, working closely with the FCA, to gain a fuller understanding of consumer advice needs in the current market place and how we and the wider sector can meet these. As part of this work we will also consider the practicalities of implementing the changes suggested by the report and how these measures would add value to consumers. We will assess what type of business we will need to deliver our revised objectives in terms of size, budget, skillset and delivery mechanisms how we move towards that type of business, and in what timeframe. We will convene a panel of stakeholders to advise us in addressing the Review s recommendations, help shape the investigation, consider any emerging findings, and provide robust scrutiny and challenge. This will consist of at a minimum experts and practitioners from industry, the consumer groups, the voluntary sector and academia and will draw on the Service s existing consultative forums which advise and scrutinise its work. We will publish membership and terms of reference of the panel in due course. We will submit this assessment and an action plan with proposed changes to the FCA and HMT in autumn 2015 and put this in the public domain. We will also carry out work to explore the recommendation to create a more expert financial helpline; this will include gaining an understanding of the consumer need 3

4 and the potential costs, working closely with the FCA and the Financial Ombudsman Service (FOS). MAS as a gap filler, co-ordinator and leader across the sector (recommendations A 12, A14, A 15, A17, and A19) We agree with the report s suggestion that we should fill gaps in advice. This was indeed the original intention behind the establishment of the organisation in We are already doing this, as the report acknowledges, by working to support the implementation the Government s new Pension Wise guidance. This will include new online content to help people pre- and post-retirement, including guidance on how to budget in the run-up to retirement, a retirement adviser directory and annuities comparison table all of which fill gaps. But the gap test needs, importantly, to consider questions of quality and reach as well as availability. For example there are some areas where fully independent information is crucially important; and there are many consumers who do not, or would not, use commercial information available from financial services companies. We are pleased to see the report endorse our efforts to be a leader and co-ordinator across the financial capability sector, particularly through leadership of the Financial Capability Strategy for the UK (or the UK Strategy for short). This strategy is about improving financial capability through driving quality, innovation and good practice. In September 2014, the Service published the draft strategy ( highlighting priority areas for joint work and proposing high level solutions to help consumers. In the period ahead, we will, through the UK Strategy, enhance our engagement with commercial and non-commercial stakeholders, leading work to improve the effectiveness and efficiency of the sector by supporting policy-makers, commissioners, funders and providers to make better use of evidence on what works (and what doesn t) and to adopt best practice when developing programmes. Specifically, in 2015 we will: - Create an accessible and searchable online Evidence Hub which will summarise current evidence on best practice. We will be supporting the sector to understand and apply this evidence. - Deliver a Financial Capability Evaluation Toolkit which will provide organisations with the guidance and practical support they need to measure their programmes impact in a more robust and consistent way. Financial education (recommendation A 18) We welcome the recommendation that we should seek to develop a more active and strategic co-ordination role on financial education in schools. 4

5 In 2015 we will deliver a financial capability evaluation framework for teachers and parents, helping those who deliver financial capability interventions to understand, provide and measure best practice. We will be working with stakeholders over the coming months to develop a plan for how we intend to take forward this recommendation, including looking into the specific ideas raised in the report, such as a prize for schools demonstrating excellence in delivering financial education. Stronger ties with the FCA family (recommendations A20 A23) We are also pleased to see the report call for stronger ties between the FCA and the regulatory family we fully support this and will work to implement the relevant recommendations with the FCA, FOS and the Financial Services Consumer Panel (FSCP). We will work closely with the FCA to exploit synergies between our respective remits. An important part of this will be ensuring that our insight is shared with the FCA, and that our expertise is brought to bear in helping the FCA shape its regulatory policy. We also look forward to working closely with the FCA in the development of the UK Strategy. Website costs The Review suggests that to date we have invested over 100 million in the development and promotion of our website since We calculate a lower figure of 92m invested in the promotion and development of the website since The difference in the figures results from the fact that the Review team take account of a higher overhead allocation and redundancy costs, which we believe it is incorrect to do. 1 Our response to each recommendation is outlined in the following pages. With best wishes, Caroline Rookes 1 We have spent 10m less on website development and operation than the Review team calculates. The Review team has assumed a higher allocation of staff costs to website development than we accept, and they have included 4m redundancy costs in and the costs of webchat within their calculation of web spend, neither of which we include within our definition of spend on online delivery. 5

6 Recommendation Debt advice A.1 MAS should establish a high level Debt Advice Steering Group at the earliest opportunity comprising senior representatives from creditors together with the Chief Executives of Citizens Advice, StepChange and the Money Advice Trust, to help improve the efficiency, effectiveness and reach of free debt advice. A.2 MAS should use the Debt Advice Steering Group as a vehicle for brokering agreement on provision of a common front-end system across the main free debt advice providers, to triage consumers needing debt advice into the most appropriate channel. A.3 MAS should work with the Debt Advice Steering Group to ensure that the funds available for debt advice, including financial services levy funds and voluntary contributions Response We welcome this recommendation and have started the process of appointing senior members and preparing the terms of reference with a view to holding the first meeting in Q1 2015/16 invitations will go out as the report is published. We agree and look forward to working with colleagues on the Steering Group to broker agreement on this, which builds on discussions we have been having with key advice providers for some time. As a result of the new consumer credit authorisation regime we have recently, in partnership with the debt advice sector, set up a specific contact centre and triage process to handle calls from clients impacted by the changes to the authorisation of debt management firms. Learnings from this will be shared with the wider sector with a view to extending the approach. This is a priority for the Money Advice Service and we will work with the Steering Group to ensure funds are deployed in the most effective way. We have a track record of improving the efficiency of the free debt advice sector we have significantly reduced the unit cost of debt advice sessions in the 6

7 from energy and water sectors, are deployed in the most effective way. A.4 MAS should work with creditors and debt advisors to broker agreement on the use of nudge processes to refer consumers with problem debt to advice bodies at an early stage. A.5 Government should in due course review the legal framework for debt administration - in order to provide consumers who agree to specified debt repayment schemes with a breathing space by freezing interest and charges, and to ensure a fair and appropriate basis for debt repayments to different classes of creditor. A.6 MAS should work with the industry, the charitable sector and the media to raise consumer awareness of how to avoid problem debt and the options for advice, and the importance of seeking early help. programmes we fund while also enhancing quality, as highlighted by the Review s report. We have also made initiatives, such as the Common Initial Assessment and quality and evaluation frameworks, available to other debt advice providers to help them deliver an efficient, high-quality and effective service. We agree. The Service has already started work to evaluate the effectiveness of current interventions and to test new ones that fully incorporate nudge techniques. To support this, we will be holding a collaborative event in the Spring with creditors to share best practice for identifying customers in need of help at an early stage, and referring them to advice. The event will also enable creditors to share and discuss the types of interventions they use, and collectively identify improvements. This recommendation is for Government to consider. We are fully supportive of initiatives to strengthen support for debt advice clients and are keen to work with Government on how to achieve this recommendation. We agree and are very keen to work with all sectors industry, the charity sector and the media to raise consumer awareness around avoiding problem debt and the benefits of getting help. In 2014 we ran a number of consumer awareness campaigns to help consumers including the importance of saving 3 a day to build a savings buffer. 7

8 We have recently undertaken a pilot programme to promote awareness of free debt advice in three cities across the UK and learning from this will be shared and applied going forward. In 2015/16, a key priority for us will be working with over-indebted people and advice organisations to identify the causes and symptoms of problem debt, and promote the benefits of debt advice. A.7 MAS should, when opportunities allow, seek to integrate its debt avoidance face-toface, phone and web chat advice into its debt advice funding regime. A.8 MAS should work with debt providers and creditors to promote the adoption of common protocols across the sector in order to raise standards and improve the efficiency of debt advice provision. We will consider this alongside the other recommendations that propose long-term and far-reaching changes to the organisation s money advice work. We agree with this recommendation and are very keen to build on the progress we have already made to promote the adoption of common protocols across the whole sector. To date we have developed a common evaluation toolkit for the sector to ensure consistent measurement of client outcomes and a quality framework to enhance quality standards among both organisations and individuals delivering debt advice. This work will continue with the launch of a peer review scheme shortly. We have also developed a new Standard Financial Statement, a standard template for clients to record their income and expenditure; and a Common Initial Assessment, which advice providers can use to ensure that clients receive advice in the way best suited to their needs. 8

9 Programmes funded by the Money Advice Service are required to use these common toolkits and frameworks and we will work closely with providers across the whole sector, including through the Debt Advice Steering Group, to embed their use by other organisations. A.9 MAS should work to help raise standards in the wider debt advice market by undertaking mystery shopping and gathering other intelligence, engaging closely with firms, identifying good and poor practice and publishing its findings. Money advice A.10 MAS should move to the recommended new website model and minimise spend on marketing activity. We support this recommendation. We have already laid the groundwork to raise standards across the wider sector, including through the common evaluation toolkit for the sector to ensure consistent measurement of client outcomes, and also through the new peer review scheme which will identify whether appropriate advice has been given by advisers. We will consider this recommendation and the critical questions it raises, along with other recommendations that propose changes to the business. As a first step we have significantly reduced our proposed spend on marketing in 2015/16. We will also undertake a programme of work to understand the needs of consumers in the current advice landscape and the extent to which there may be duplication or gaps across the market, including our own service. We will work closely with the FCA and keep HM Treasury closely informed on this. We will also be guided by a robust independent scrutiny panel of experts. We will publish terms of reference and membership of this panel in due course. This analysis will form the basis for considering the practicalities and implications of implementing these recommendations. 9

10 It is vital to undertake this in-depth analysis of consumer need before making changes to the business which go beyond those which we are already putting in train following the review. We will report to the FCA and HMT in autumn 2015 on this investigation and proposed changes, and put this into the public domain. A.11 FCA should make rules to require retail firms to promote MAS s website and helpline. A.12 MAS should identify gaps in provision and take steps to address them, including through grant funding. This is for the FCA to consider however we support any efforts to work more closely with the financial services sector and ensure that consumers are signposted to the right advice to help them make good financial decisions. We agree. Our priority is to provide support and guidance where there are clear gaps in the market for example we provide online tools and content on topics no other organisation covers; for example, a new annuities comparison table, retirement adviser directory (shortly to go live) and a free debt advice locator tool. We continuously review our content to minimise duplication and where we do find overlap we decommission material for example from April 2015 the savings comparison table will be discontinued, because consumers can access similar material elsewhere. We will consider the scope for moving to grant funding as part of the further review work (see recommendation 10 above). A.13 MAS should first pilot and then establish a Financial Helpline and this should be promoted by retail financial services firms. As a first step we will further explore the Review s assessment of there being a gap in the market for specialist telephone advice on financial products, and the costs and benefits of implementing this. 10

11 MAS, FCA and FOS should coordinate to ensure effective triage and a one stop shop for consumer queries on financial matters where possible. A.14 MAS should work with industry sectors to simplify consumer information about products and help make product features more comparable. MAS should commit to a small number of such projects a year to sustain momentum. As part of this, we will work with the FCA family to understand whether there is the potential to use existing telephone services to meet consumer needs. If this research shows this service to be necessary we will pilot it and evaluate the cost and benefits of reshaping our telephony service. We agree and welcome the opportunity to work more closely with the FCA and the financial services sector to help consumers understand the implications of their financial choices. In doing so, we will take into consideration both consumers need for simplicity, and the importance of them understanding full terms and conditions. We will harness our existing relationships to move this recommendation forward for example we chair a group of practitioners at the Association of British Insurers focusing on this issue. We are also a member of the BBA Consumer Panel which is considering this issue closely. In addition, a strand of the Financial Capability Strategy for the UK is to improve the ease and accessibility of financial products. Under this strand, we will work with industry to understand better what styles and channels of communication work best to engage consumers with their finances. A.15 MAS should drive quality, innovation and good practice in consumer information provision through a range of approaches that encourage information and guidance providers to adopt good practice. We agree. One of the underlying objectives of the Financial Capability Strategy for the UK is to drive forward quality, innovation and good practice across the whole sector. As part of the UK Strategy, we will publish an Evaluation Toolkit in 2015 that providers can use to measure and identify best practice interventions that improve 11

12 people s financial capability. We will share this knowledge across the sector to raise standards and encourage more good practice. A.16 MAS should establish consumer-oriented quality criteria and a panel of independent experts, list providers on its website, and explore the feasibility of awarding good providers with a MAS Quality Mark; the government should consider whether it is necessary to clarify MAS s statutory powers in this area. A.17 MAS should work with the industry, consumer media and others to facilitate and coordinate consumer education campaigns on key issues. We agree with the review that we can do more on the supply side to help other providers of advice define what good looks like and deliver a high-quality service to consumers. The first step is to identify and pool together the best practice across the sector. We will do this shortly by setting up a financial capability evidence hub, which will outline what is proven to work, and what does not, in raising financial capability. However, this recommendation is also relevant to the FCA and the Government as it may involve changes to our current remit. We agree and welcome the opportunity to work more closely with industry, consumer media and others to deliver consumer education campaigns. This builds on our approach over the last year, in which we have run a range of campaigns aimed at raising awareness of topical or general personal finance issues and offering simple-to-understand pieces of advice. Campaigns to date have included save 3 a day to cover unexpected bills and costs, and are you prepared for a possible interest rate rise? During the next phase of work we will look to build on this experience identifying current issues to which consumers relate, and also working more closely with industry and consumer media to get key messages across. 12

13 A.18 MAS should play a strong strategic coordination and support role in embedding financial education in schools, engaging with the Department for Education and devolved administrations as appropriate. We agree and will publish a plan by the Summer setting out how we intend to take this recommendation forward. This plan will build on the work we have already done for young people, including a resource for practitioners who work with young people, and content, videos and an app designed to help young people save money. In 2015 we will also deliver a financial capability evaluation framework for teachers and parents, helping those who deliver and fund financial capability interventions to understand, provide and measure best practice. In doing this, we will work closely with the Department for Education and other stakeholders to assess where we can add most value and build on existing initiatives. A.19 MAS should establish a research hub for sharing insights and publish an Annual Review of Financial Health. Providing research which is innovative and helpful to the sector has been a key priority for the Money Advice Service to date. Our research reports, including The Financial Capability of the UK and Indebted Lives, have been widely welcomed by the sector. We agree with this recommendation, will continue to undertake research programmes, and will conduct a further financial health check on the nation through the 2015 Financial Capability survey. In addition, we will be delivering an online financial capability evidence hub shortly that will summarise current evidence on what works and best practice, and we will be supporting the sector to understand and apply this evidence. 13

14 A.20 MAS should draw problem issues linked to consumer behaviour and understanding to the FCA and other authorities attention where appropriate, and engage with them on the sorts of remedies likely to be most effective. A.21 The FCA and MAS should coordinate more closely together to seek to make the financial information and advice, and debt advice markets work better for consumers. We agree and will work closely with the FCA family to share more consumer insight and what type of interventions may be effective. We agree and will seek to identify ways in which we and the FCA can work more closely together at all levels, towards the goal of ensuring that financial markets work better for consumers. We will work closely with the FCA to exploit synergies between our respective remits. An important part of this will be ensuring that our insight is shared with the FCA, and that our expertise is brought to bear in helping the FCA shape its regulatory policy. We are pleased to have been invited by the FCA to sit on its co-ordination committee with other parts of the FCA family, which will help in fostering better collaboration in the interests of consumers. A.22 MAS and the FSCP should review how to build a stronger connection in order to support their respective responsibilities. A.23 The FOS and MAS should build a closer partnership in order to share intelligence and insight. We agree and will look to build stronger ties with the FSCP for example we have agreed with the FSCP to hold quarterly meetings with one of its sub-groups. We will also invite the FSCP onto our Customer Research and Evaluation Group this body looks at customer insight and how to improve the gathering and sharing of this. We agree and are keen to work more closely with FOS. We will also invite the FOS onto our Customer Research and Evaluation Group. 14

15 A.24 The government should consider what short-term measures it can take to strengthen the accountability of MAS. This recommendation is for the FCA and Government to consider. We would be pleased to work with the FCA and HMT on possible solutions, both short term and long term, to improve accountability. We have agreed with HMT that our Chief Executive will meet at least quarterly with the Treasury Director of Financial Services and at least biannually with the Economic Secretary to the Treasury. We have also agreed with the Treasury that we will, twice a year, provide a progress update to Treasury Ministers on how we are delivering against our statutory objectives and the challenges ahead. A.25 The MAS Board should be strengthened at the earliest opportunity in order to align it more closely with the new business model. We agree and are currently recruiting for two new members who have the right experience, such as financial services experience, as the review suggests. 15