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Mortgage advice is a specialised case

The Thoresen review of generic financial advice was published last month and recommended the establishment of a national money guidance service. It was accompanied by the Treasury’s announcement of a £12m pathfinder programme to help facilitate the next stage of Aegon UK chief executive Otto Thoresen’s findings.

The main thrust of the review is that consumers need help with financial issues. It adds that the money guidance service should provide a free source of independent advice on just about any aspect of personal finance.

Thoresen says the service should be accessible over the phone, via the internet and face-to-face to maximise the number of consumers that will use it.

Crucially, the report recommends that the service should be sales free so any advice given would fall short of recommending products.

Presumably, the reasoning behind this is that potential users should see the service as a safe source of information without the interference of salespeople.

The report also says its proposed funding should come not only from providers but from regulated firms too. But this is likely to cause consternation among brokers who will feel they are being hit with yet another levy on top of the regulatory fees they already pay. The fact the service won’t allow them to recommend products won’t help either. If we look at the notion underpinning the service, improving consumers’ knowledge of personal finance could help by teaching them about the benefits of advice.

And most of us would support any effort to help consumers combat the jargon prevalent in the financial services industry.

But the need for mortgage advice is triggered by the fact that customers want to buy property or secure remortgages.

In this case, although generic advice would be helpful in explaining the terminology, many consumers will find the service’s inability to recommend deals frustrating.

They will need to be pointed towards brokers and this raises the question of who would be recommended and why.

The reality is that mortgages exhibit a different dynamic to other areas of advice such as savings and retirement planning.

Attempts to tackle financial exclusion and encourage more consumers to plan for their futures should be welcomed but mortgage advice is a special case.

There’s no harm trying to improve consumers’ knowledge of general financial issues but I suspect we will continue to find that they only show an interest when they need specific advice. Let’s hope that the next step of the consultation considers this.

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