Thoreson Review Interim Report published

Resolution Foundation response to Thoresen Review Interim Report

Executive summary – our key messages

Chapter One
The Foundation welcomes the Review’s intentions of carrying out a local level analysis of existing advice provision. This is very important to fully harness the potential of existing local trust relationships, brands, and market coverage of hard to reach groups. New Philanthropy Capital’s forthcoming report on financial exclusion may prove a helpful starting point for the team – part of this project was to carry out a large mapping exercise of charitable organisations (including those giving advice) at a local level.

It would also be worth bearing in mind the need to simultaneously identify “trusted intermediaries” (as mentioned in 2.42) in local communities as a means of engaging groups who may not seek generic financial advice without encouragement. These intermediaries will vary from community to community.
Chapter Two
The analysis of a new service’s target market if very well constructed. Although we strongly support universal access to a GFA service, it is worth bearing in mind that it is not those in financial crisis or who are financial excluded who are necessarily most vulnerable to the consequences of poor decision making.

“vulnerable” should be interpreted as someone having nowhere to turn should they encounter financial problems. It is targeting this form of vulnerability with preventative advice which is key to a new GFA service and something which must be made clear to the public through marketing, as well as the financial services industry and existing third sector debt advice services.
As such, it is critical that a new service is promoted amongst low to median earners, who are currently under-served by both third sector crisis/debt services, as well as the commercial sector.
Close coordination between the Review Team and those working on the financial capability and inclusion strategies is important in order to prevent duplication of effort in targeting the financially excluded and those in financial crisis at the expense of other groups in need of GFA.
Chapter Three
We would urge the Review Team not to rule out the need for a regulatory carve out for a new GFA service to enable it to deliver effective advice. The Interim Report’s suggested wording to remain within regulatory boundaries: “most people in your situation consider life cover.” (Box 3.8) has two key flaws. First, as the FSA’s
Perimeter Guidance states, this wording could (and very possibly) still be interpreted as “information with the force of a recommendation” and be viewed as a regulated activity when the adviser is discussing mortgages, insurance and investments. The second flaw is that the wording may not be strong enough to ensure people are able to take action. As such, this approach is potentially the “worst of both worlds”. The Review Team must avoid the potential watering down of a new GFA service into an “information service”. It is possible that a regulatory carve out may be required to enable generic advisers to do this, and as such, should not be ruled out at this stage.

The Foundation supports the Report’s interim conclusion which favours a “hybrid” model of delivery, which combines a central hub delivering internet content and telephone services with a network of accredited partners delivering F2F advice. We also support the intention to consider in more detail the potential role of the commercial sector in delivering F2F generic advice as an accredited partner. There are, however, obvious risks associated with this strategy – not least the undermining of the public’s confidence in a new service as impartial and separate from the sales process. A lower risk alternative to this would be the co-location of independent generic advisers in high street branches of banks and building societies, and given the potential benefits of such a strategy, this ought to be investigated further.

Regarding the level of training required for GFA staff, we would suggest the Review Team consider the benefits and disadvantages of scripted versus “off script” advice delivery, and what balance ought to be struck between these two methods to achieve the levels of cost efficiency, quality and consistency of service required. The Review’s pilot projects will certainly illuminate the benefits and drawbacks of these approaches in practice. In implementing this approach, the Review Team will need to establish 1) which common queries can be resolved with standardised forms of words and checklists, and consult appropriate stakeholders to draft them, and 2) to what level advisers will need to be trained before requiring the assistance of scripted conversations (a strategic resourcing question which may be illuminated by piloting).
Chapter Four
We recognise that the governance of a new generic advice service is a crucial factor in its overall success – the take up of a new service and its perception among the public will hinge on the right body being selected to represent the GFA “brand”.

The Foundation considers a newly established public body to be the most appropriate governance structure for a new advice service, for a number of reasons. However, we agree with the Report’s interim conclusions that establishing a new public body is not without significant challenges – not least the need for new primary legislation to ensure this new body had sufficient executive powers to discharge its role. Nonetheless, the Foundation would urge the Review Team not to dismiss this organisational structure on the grounds that the primary legislation required represents too lengthy a delay in the establishment of a new advice service. We would suggest that an interim solution be sought to enable a generic advice service to be launched with little delay, whilst work progresses on achieving the longer term goal of creating a new public body to ultimately discharge this function.

Chapter Five
We agree with the Report’s interim conclusions that the exact costs of a new generic advice service are very hard to predict. Data from the ongoing Pilots will certainly help generate a more accurate range of costs. However, the Foundation would suggest the Review Team not attempt to provide any more precise figures until after delivery on a more significant (e.g. regional) scale is attempted and over a longer time period.
There has been broad support (from all sectors, including figures in the financial services industry) for a funding settlement for a new GFA service which splits contributions equally between the government and industry. However it is crucial that the Review Team considers carefully how the industry’s contribution might be collected. A poorly designed contribution process may have an impact not only on the overall administrative costs of a new service, but also on its reputation with the financial services industry as a whole.
The Foundation believes a new universal levy would be the most suitable funding method for a new GFA service. We would suggest that the amount paid is dependent on the size of company (based on annual turn over), with a cut-off point so that the fee might only apply to a set number of the largest regulated and unregulated financial services companies in the market. Clarity, transparency, and predictability of fee level for the financial services industry is key.

The financial services sector is a valuable source of expertise which need not go untapped when the new service is being established. In the short term, one of the most significant costs implied in delivering a new advice service will be staff recruitment and training. Whilst it might not be desirable to have financial services providers delivering GFA directly, they could make a valuable contribution by helping to train newly recruited generic advisers or act as expert consultants when training materials and scripts for advice are being developed. This could certainly act as a form of contribution in kind from the sector, at least in the short term until a system of administering financial contributions is fully established. We would also suggest the Team explore the feasibility of co-location of a GFA service in high street branches as a contribution in kind (subject to the considerations of risks outlined below).