Any government initiative that concerns the provision of advice in the financial services sector should be taken seriously by brokers involved in selling mortgages and related insurances.
For some time, the government has been looking for ways to give consumers better access to financial advice, particularly those who would not normally approach brokers. Otto Thoresen, chief executive of Aegon UK, has been appointed by the economic secretary to the Treasury to examine the feasibility of delivering a national approach to generic financial advice.
The aim is to ensure there is greater access to high quality, affordable advice for those most vulnerable to the consequences of poor financial decision-making. The findings of Thoresen’s review might affect the way consumers receive financial advice and also have implications for the mortgage marketThe review will lay out a range of models for providing greater access to financial advice on a national scale, taking account of likely future developments in financial services markets – personal accounts in particular.
It will make recommendations on the most effective ways of serving various groups of consumers, particularly those most vulnerable to poor financial decision-making. Recommendations are likely to include a telephone-based point of contact as well as the potential for face-to-face services. It will also recommend protocols regarding advice, accreditation, quality control and the boundary with regulation. Finally, it will recommend the institutional arrangements and governance systems it deems necessary.
Thorensen will be supported by an external advisory reference group including representatives from the Financial Services Authority, the Trades Union Congress, the government, the Association of British Insurers, HBOS and Barclays.
“The case for a national approach to generic financial advice is made and this will happen,” Thoresen said recently. “The industry has two choices. We can engage with the design of this, consider how to participate in its delivery, shape the cost and budget and take reputational as well as economic benefits from it or we can disengage, the regime will be built and directed without our input and we will suffer another reputational hit and in all likelihood make smaller business gains out of it.”
What this means for the mortgage sector is not yet clear but the provision of generic advice to consumers could have important implications for all financial advisers. The initiative is aimed at the life, pension and investment industries but as Thoresen indicated in his speech, it is also driven by “rising indebtedness and a decreasing propensity to save” as well the British cult of property.
The life, investment and pension industries share a common regulatory environment and any initiative that affects these sectors could include the provision of advice on mortgages and loans. An interim report will be published in the autumn. I suggest we all read it.