Generic financial advice 'requires further funding'

The Treasury Committee has called for an increase in the funding of generic financial advice as part of its report into the promotion of financial inclusion.

The committee believes a key part of promoting financial inclusion lies in ensuring consumers have access to “appropriate” financial advice.

The report states: “It is clear that improving access to financial advice would have benefits for individuals, the government and the financial services industry. All too often in pronouncements from government and regulators, consumers are told to seek advice, but with little consideration as to where they should turn.”

The committee says the implementation of a National Pensions Savings Scheme (NPSS) and moves to make individuals more responsible for their retirement planning will increase the need for many consumers to access generic advice.

It points out evidence which suggests eight million consumers who earn between £10,000 and £22,000 find it difficult to access generic financial advice which is separate from the sales process.

As a result, it suggests Citizens Advice’s pilot project of working with IFAs on a pro bono basis is expanded by additional money from the industry and resources from the Financial Services Authority’s (FSA) financial inclusion fund.

It recommends the Treasury assumes lead responsibility for taking forward discussions on the provision of generic financial advice and facilitating an agreement between the FSA, the financial services industry and other interested parties on the most appropriate framework.

The report adds: “The major issue that needs to be resolved is how such services might be funded. Increased provision of generic financial advice will lead to benefits not only for the financial services industry, through a better informed and more engaged customer base, but also for the state benefit system.”

The committee suggests increased provision could be funded through a partnership between the public and private sectors, and it calls on the government to take forward discussions with the private sector on possible funding options.

In addition, it says the FSA needs to clarify the point at which advice ceases to be generic and becomes part of regulated sales advice, in particular the extent to which information gathered during the generic advice process can be relied upon by a regulated adviser.

It adds: “We would welcome accredited courses for generic financial advisers, combined with a set of quality assurance standards.”

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