The UK does not need a national financial advice service

| March 3, 2008 | 0 Comments

The recommendation of a free national financial advice service by the Thoresen Review is deeply flawed, and no panacea for sloppy regulation.

The BBC reports on recommendations by the Thoresen Review of Generic Financial Advice, which includes a free national financial advice service, provided for using the internet and telephone services.

Commissioned by the government, the report suggests such a scheme would cost nearly £50 million a year to run.

And let’s immediately make clear that the report findings are nothing more than yet another white elephant for the financial services industry - and likely an appalling waste of tax payer money.

The government has already attempted to reach out to consumers in the financial services sector - the FSA already runs Money Made Clear on its website, which attempts to educate consumers on financial services.

Additionally, there are a range of other services, such as Citizen’s Advice offering phone support, and various internet channels - not least forums and messageboards - where people can be advised by professionals.

The problem is not that these services are falling short - the problem is that regulation of the financial services industry is falling short.

Currently, financial services are regulated by at least 3 different bodies: the FSA, BBA, and Trading Standards.

Each has a different remit, with the FSA covering insurance and mortgages, BBA covering banking (though it supports consumers being screwed by providers), and Trading Standards (which suffers from being administrated at the regional level by local authorities rather than a national organisation) left fighting loans sharks.

Firstly, there’s the immediate problem of potential consumer confusion as to where to turn if they do have concerns about financial services.

Secondly, the fact regulation is spread about these three bodies means problems with co-ordination.

Thirdly, there is a serious lack of enforcement going in when people attempt to cheat the system.

We’ve already reported on how companies who mislead consumers in aggressive sales campaigns are hit by paltry fines. The FSA already offers discounts on fines for early co-operation.

Even as the editor for Finance Markets I’m guaranteed at least one call each week coming from a “free national advice service” which then tries to fob me off with consolidation loans. Sure, Trading Standards have been informed, no, there has been no word on action having been carried out against these slippery companies, who usually attempt to cover their tracks as much as possible.

In short, cowboys who flaunt the system to their advantage could look to lucrative short-term profits and nothing worse than a mild slap on the wrist from the FSA in the long-term.

No wonder consumers need protecting.

Is a free national helpline and internet service going to change all this?

Not in the slightest.

Or, at least, not until financial services regulation is tightened up, centralised, properly co-ordinated, given sharper teeth - and perhaps more importantly - faster to act on those companies undermining the industry and customer confidence in it.

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