The Advice Gain

14 March 2007

The Resolution Foundation is an independent research and policy organisation which is currently
focusing on how people on low incomes access and use financial services

NEW RESEARCH SHOWS FINANCIAL SERVICES INDUSTRY SHOULD BACK
PROPOSALS FOR NATIONAL FINANCIAL ADVICE SERVICE

At a conference in London today, the Resolution Foundation has published new research showing that that the financial services industry will benefit from Government plans for a national financial advice service. The research, commissioned by the Foundation from Deloitte(1), shows that the impact of increased access to financial advice among people on low to moderate incomes will be to:

• · Increase take up of long term savings and insurance products, and reduce levels ofdebt and credit
• · Deliver long term benefits to the financial services industry by promoting a more sustainable financial services market
• · Support public policy goals, amid concern about rising consumer debt and low levels of saving

Based on just 10 per cent of low earners acting on the advice they receive, the research shows that within four years of making generic financial advice available:

• · New contributions to medium term savings plans would increase by £1.5 billion net
• · Pensions premiums would increase by £560 million
• · Life assurance premiums would increase by £225 million
• · Credit card debt would fall by two-thirds from £2.5 billion to £830 million with a further £2.2 billion wiped off other unsecured debts, facilitated by better borrowing with acceptable risk-adjusted returns for the financial services industry

The research is today unveiled at a conference, organised by the Foundation to coincide withthe launch of the Treasury-sponsored Thoresen Review of Generic Financial Advice (2).Among the speakers at the conference are Economic Secretary to the Treasury, Ed Balls MP; Pensions Minister, James Purnell MP; and the Chief Executive of AEGON UK, Otto Thoresen, who is leading the review (3).

The conference comes a year after the Resolution Foundation first highlighted the financial advice gap faced by 15 million low earners in the UK (4). Since then, its proposals for a national service to provide generic financial advice, targeted at people on low to moderate incomes, have been endorsed by a wide range of parties, including MPs on two parliamentary select committees (5). This culminated in the Treasury’s backing for generic advice and the announcement of the Thoresen Review in January 2007.

Clive Cowdery, Chairman of the Resolution Foundation, said: ‘Greater access to financial advice links a sustainable financial services market with the delivery of public policy goals. Thiscreates a win-win situation for the Government and the financial services industry. The industry will want to energetically get behind the work of the Thoresen Review.’
Otto Thoresen, Head of the Thoresen Review of Generic Financial Advice said: ‘Generic financial advice is an important issue for all – financial services companies, Government and most importantly consumers. My review will create a blueprint for how a national approach to generic advice can be delivered, and I encourage all stakeholders to contribute fully to this debate. I welcome the work that the Resolution Foundation has done in this area and the contribution it has added to this debate.’

For further information, please contact:

Temple Bar Advisory
Alex Child-Villiers     07795 425580

Notes to editors:
(1) The research is published in The advice gain which can be downloaded at www.resolutionfoundation.org.uk It is based on modelling by Deloitte showing the impact of improved financial decision-making as a result of increased access to financial advice among people on low to moderate incomes.

(2) The conference, held at Church House in Westminster and attended by over 100 delegates, will hear from a wide range of leading representatives from the Government, the financial services sector and voluntary sector organisations. The outcome will be used to inform the work of the Thoresen Review of generic financial advice.

(3) The Thoresen Review of Generic Financial Advice was announced by the Economic Secretary to the Treasury on 15 January. On 13 March 2007, the Review published a call for evidence and details of an External Reference Group to support its work. See www.hmtreasury.gov.uk/independent_reviews/thoresen_review/thoresenreview_index.cfm

(4) The Foundation has previously published research showing that people in this income group stand to gain as much as £60,000 by the time they reach 60 if they are given access to financial advice, and identified potential welfare benefit savings of up to £100 million a year by 2010 as better financial-decision-making lifts people clear of the threshold for receiving Pension Credit. This research was published in A national dividend which can be downloaded from www.resolutionfoundation.org/pdfs/research_report_A_national_dividend_15092006.pdf

(5) See the Treasury Select Committee’s report on financial inclusion, published in November
2006, and the Work and Pensions Select Committee’s report on pension reform which was
published in July 2006.