Generic Financial Advice Moves A Step Closer In The UK

by Carla Johnson, Investors Offshore.com, London

23 October 2007

It was announced this week that Otto Thoresen has published the interim report of the Thoresen Review of Generic Financial Advice (GFA).

The report showed that, on the evidence the Review has studied, GFA is an essential element in improving financial capability across the UK, that it is feasible to build a national service, and that benefits would outweigh costs by 3.5 to 1.

Depending on the final design, annual running costs could range from GBP40m to GBP80m, according to Thoreson. The report suggests that the costs should be borne equally by Government and the financial services industry, broadly defined, and welcomes further debate on how this might work in practice.

Based on consumer research, the report sets out key principles for delivering a national GFA service, namely:

• To be "on my side": impartial from government and the industry;
• To be supportive and informative: not criticising, but certainly persuasive of the need to act; preventative: helping people take charge of their affairs before serious problems develop;
• To be available to all;
• To be delivered in an environment which is clearly not linked to a product sale; and
• To be able to give guidance, to empower individuals in making decisions, but to stop short of recommending a specific product with a specific provider.

The report further suggests that GFA should offer a range of information and guidance, from 'jargon busting' to managing debt and budgeting, and understanding tax and benefits, delivered through a mix of channels.

Otto Thoresen announced that:

"The research and evidence we have gathered so far has enabled us to define in broad terms some of the principles for a national system of generic financial advice. Complete impartiality and effective marketing will be critical. But it's also essential to design a system which will be of genuine benefit to people and which can be sustained over the longer term. We are currently running pilot schemes to test out elements of a national system and the findings will enable us to develop the proposals further in the months ahead."

Economic Secretary to the Treasury, Kitty Ussher MP added:

"I want everyone in the UK to have access to high quality information and guidance on personal finance, whether it be for 'jargon-busting' or to help them get the best out of the financial products and services on offer. This will help people make decisions that are right for them and manage their money better. "The Government asked Otto Thoresen to research and design a blueprint for generic financial advice provision in January. I welcome this interim report which sets out the Thoresen Review's direction of travel and highlights the excellent progress made on this exciting work. I look forward to Otto's final report and his recommendations in the new year."

The report says that although GFA should be available to all, it should be designed, branded and located to attract the groups of people who will benefit the most, particularly the 7.5 million who can be described as most vulnerable to the consequences of poor financial decision making. Signposting people to other commercial providers of advice and financial services solutions will be an important part of GFA. The report concludes that it will be important for existing trusted advice providers to be part of the delivery infrastructure.

Otto Thoresen will make final recommendations to Government in the New Year, which take into account the findings from the pilots currently taking place in North West England, London and South Staffordshire.

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