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Financial Advice Market Review and consultation on public finance guidance

22 December 2015

In the last year local Citizens Advice helped people with 1.8 million queries about debt and personal finances. Through our financial skills programmes we also help people to avoid money problems and gain knowledge, skills and confidence with money. We are also a partner in the Government’s new Pension Wise service, delivering face to face guidance for people approaching retirement.

In this document - Financial Advice Market Review and consultation on public finance guidance [ 1.3 mb] - our joint response to the Government’s consultation on public financial guidance, and the Financial Advice Market Review, we describe why good advice and guidance matter for consumers, particularly at a point of rapid change in the consumer and public policy landscape. Unsecured household debt is expected to rise to around £300 billion by 2020; welfare reform continues; consumers have new choices around pension decumulation. Yet over thirteen million UK adults find managing money difficult, and only two per cent of us are willing to pay today’s going rate for pensions advice. This is despite significant investment in debt advice, money advice and financial capability services through a range of levies and directly from Government, local authorities and private organisations, including £80 million per year from the Money Advice Service alone.

We conducted research using our data and national polling to highlight the reasons so many consumers are missing out on the benefits of money advice. That research identified not one but four advice gaps.

  • The affordable advice gap which affects consumers who are willing to pay for advice but not at current prices.

  • The free advice gap which affects people who want advice but are unable to pay for it.

  • The awareness and referral gap which affects people who are not aware that advice exists, or where to get that advice.

  • The preventative advice gap which affects those who would benefit from having money advice as a preventative measure.

The four advice gaps we have identified are not distinct and their overlap highlights the need to consider the provision of advice and guidance as a coherent system. Citizens Advice has responded to these two reviews jointly because policy on financial advice and public guidance must be developed in tandem. We argue that the biggest financial advice gaps are around pension saving and decumulation for low to middle earners. The biggest guidance gaps are around saving, taking out credit and coping with debt for consumers managing tight family budgets.  Different consumers sometimes need advice and guidance at the same time, or in different areas at different times of life. For example, people with moderate resources are likely to need both guidance and advice around pension decumulation.

The Financial Advice Market Review (FAMR) and consultation on public financial guidance offer a crucial and very timely opportunity to increase demand for and supply of advice and guidance, in order to plug each of the gaps we have identified and empower consumers with their money.

We propose that in order to deliver for consumers, the Government should:

  • Expand the supply of advice and guidance that consumers will trust, using recognised brands to plug gaps.

  • Reform public financial guidance to put the consumer at the centre; to get more money to the front line; to integrate debt and money advice; and to make better use of life events as engagement hooks.  

Note: Citizens Advice delivers pension guidance on behalf of HM Treasury, under the Pension Wise brand. This document reflects the views of Citizens Advice as a consumer advocate and not the views of Pension Wise or HM Treasury.