4th April 2012

Moron Advice Service?

We have become ever more concerned that there is no “Cunning Plan” at the FSA to educate consumers, and especially consumers who have an IFA relationship.

This sense of impending doom has not been relieved by the release of what we understand is the first salvo of RDR awareness creation from the FSA in the form of a guide page on their website called “Changes to the way you get financial advice”.

This link and two pages is a pretty poor show, launched with 269 days to go, it is a tome that is high on “Whats” and Low on “Whys”.

The guide states:

“From 31 December 2012, if your adviser says they are independent, this will mean they are able to advise on all of the types of products
that you could invest in. If not, this means that they will be offering ‘restricted’ advice.

Restricted advisers will either specialise in specific areas, such as pensions or offer limited advice on a smaller range of products. Your adviser will have to explain to you what they can advise on”.

This has the potential to muddy the waters even further around the highly contentious subject of Restricted v Independent advice.

It is also missing a golden opportunity to talk about the importance of advisers and the advice process and it states commission is banned from 31 December and as we all know, this is not the case in terms of legacy and also life wrapped assets.

It had been thought that the MAS would step into the breach to at least answer some of the questions surrounding the RDR and the effect it will have on consumers with an IFA relationship. After all, with such a massive budget and such a highly paid plus no doubt highly motivated leader and his well-trained staff this must be a simple exercise?

Sadly we will all be very disappointed.

What exactly is the MAS set up to do? Type MAS into a Google search and it does not even show up in the search engine until page 4. A bit of SEO optimization stuff to do too I think!

The MAS board states it’s mission as “to provide leadership and strategic direction, define control mechanisms and supervise the overall management of our activities”.

It goes on to say:

“Our advice and information is available online, over the phone and face to face. We provide tailored money advice to help you make choices throughout your life, whatever your circumstances.

We will do this by being an efficient, well run and continually improving organisation with the right values, skills, competencies and resources to succeed in the task.

Well for inspirational mission statements that is top-drawer stuff, but that is where it starts and ends.

Now you will be very aware that in 2011/12 the MAS will receive funding of �£43.7 million rising to �£86.8m in 2012/13 from fees raised from financial services firms regulated by the FSA under FSMA 2000, so you would expect top quality engagement when you call them?

To test the MAS readiness to, at the very least, have informed dialogue with those concerned consumers calling them to get clarification that what their IFA had told them was correct, we conducted a “mystery shopper” exercise on the 14^th March.

If I may borrow a line from the great Blackadder, “It started badly, it tailed off a little in the middle and the less said about the end the better, but apart from that it was excellent”.

Our Panacea researcher discussed the following point about pensions asking:

I have a couple of pensions that are run by Financial Advisers. I have very little to do with them, with exception of them sending me occasional letters to inform me of how my pensions are going and whether or not I want to discuss with them making any changes. I was told by a friend of mine that from next year, I won’t be able to pay commission to the IFA's running these and I would have to pay a fee instead for any advice they gave.  Can you confirm that this is the case?

Money Advice Service Response:

Financial Advisers can choose whether or not they charge commission or a fee, and we are not aware of any plans for that to change. If your adviser is going to charge, it is because they are changing their own business model, however you can call the Pension Advisory Service as they may be able to give you more information.  They explained, “the Money Advice Service is there to help with explaining pensions themselves in terms of the different types of pensions and how they work, to educate you”.  They also said “that if anything was going to be change then they would have training for it” and as they have not had any training, “he isn't aware of anything forthcoming.

Why did the MAS not refer our mystery shopper to the FSA?

So our researcher then called the Pension Advisory Service, explaining the above points and that the Money Advice Service had referred our mystery shopper to the PAS.

Pension Advisory Service Response:

It's really down to the adviser to decide whether they want to charge commission or fee.  If there is going to be a change it's because the adviser decides to change their model and you would need to speak to them directly about that.

Our shopper said, someone had told them that the “law was changing” so you would have to pay a fee, is that not the case?

PAS: Let me check (on hold for a minute) - No I’ve just checked and we aren't aware of any regulatory changes, and if you want to double check if your IFA is going to just start charging fee only then I suggest you check with them but we aren't aware of any changes whereby all advisers would just charge fees.

We have some 260 odd days to go, the FSA have no RDR awareness creation policy or plans of any substance, Sants has resigned, Cole has resigned and there is probably no budget as that will have gone on some ill thought out RDR readiness survey and Hobman’s salary.

Tony Hobman is the Chief Executive of the MAS and he is paid a stonking �£350k a year, this would no doubt explain his smile on the MAS website. His MAS staff, it would appear, has no idea of the RDR changes ahead saying if changes were ahead they would “have been trained”.

It seems according to Jeff Prestridge that the MAS offices have been “occupied by a coop of headless chickens. No one quite knows what they are doing”.

He is right.

They did not even consider that to refer a consumer to the PAS instead of the FSA at the very least was not a demonstration of an “efficient, well-run and continually-improving organisation with the right values, skills, competencies and resources to succeed in the task”.

It was in fact another fine example of the MAS not achieving its statutory objective, namely to enhance the understanding and knowledge of members of the public about financial matters?

The PAS is also in a poor state of readiness because they have advised that after checking “we aren't aware of any changes”

This exercise also begs the question of what is the difference between the MAS and PAS if they appear to offer the same service when it comes to pensions? Well very little in regard to RDR awareness, basically the MAS is paid for by you in the financial services industry and the PAS is a grant aided organisation funded by the DWP- via your taxes. They are found in the same Google search too. The industry actually funds both organisations in reality yet are they both really needed?

How can we expect consumers to know what 2013 will bring them if the FSA has not even appeared to inform their own partner organisations?

Well Mr. Sants, oh I forgot you have resigned and will be busy “gardening”, well then anyone who will listen in Canary Wharf (again in Blackadder speak) “this is indeed a crisis, a large crisis. In fact, if you've got a moment, it's a twelve-storey crisis with a magnificent entrance hall, carpeted throughout; twenty-four hour porterage and an enormous sign on the roof saying 'This is a Large Crisis'.

Can somebody please line those chickens up now before it is too late to roost?

Pensions, FSA/FCA, RDR, Panacea Comment