Financial Advice Without The Hard Sell

The Thoresen Review reveals the foundation for a new, generic financial advice service which will be available to everyone across the UK.

Planning your finances and making the right financial decisions can be a complex process and without any expertise it's a pretty tall order. It's relatively easy to come by independent financial advice but this won't generally deal with the basics of budgeting, understanding financial jargon or managing debts. So there's an obvious gap in advice which leaves many of the most vulnerable without the help they need. The government's response to this problem was to set up the Thoresen Review and see how 'generic finanical advice' could be offered to the public. Yesterday's interim report of the review reveals the proposed building blocks for a generic financial advice (GFA) service. But before we look at that in more detail, it's important to understand the relevance of `generic' advice. Financial advisers, rightly or wrongly, have often been criticised for a preoccupation with earning fat commissions rather than providing the best solution for their clients (often by The Fool.) While I don't advocate this argument across the board, it's easy to see why some consumers may be wary of seeking advice from professionals. That's why the goverment wants a 'generic' financial advice service. Crucially, this means the guidance provided won't in any way culminate in the sale of a product and as such is completely impartial. The guidance offered will be general and therefore easily resolves any potential conflict of interest by removing any specific product recommendation. It is anticipated the annual running costs for the GFA service will fall somewhere between £40 million to £80 million depending on the final format chosen. It's proposed the costs will be borne equally by the Government and the financial services industry. A number of GFA service pilots are being carried out across the country now to identify the most effective channels for providing advice. The evidence provided by these schemes will be used as a basis for constructing the most beneficial service. The report has already identified a number of key principles on which the GFA service should be based. These are: "On my side" - that is impartial from both government and the financial services industry Supportive and informative while being persuasive of the need to act Preventative with an emphasis on helping people take charge of their affairs before serious problems develop Delivered in an environment which is clearly not linked to a product sale Able to provide guidance, to empower individuals in decision making, but stops short of recommending a product with a specific provider Available to everyone in the UK The GFA service will help people with the basics: understanding financial jargon such as APR or LTV, what a pension is, what the risks of not having contents insurance might be and so on. The service will also focus on a broad range of personal finance issues from budgeting to understanding taxation to claiming benefits and debt management. Those requiring more in depth advice will be signposted to other commercial providers of advice and financial services solutions. It is planned that the service will incorporate existing trusted advice providers into its infrastructure. Although advice will be available to everyone it will specifically target those deemed to be the most vulnerable where the service can provide the greatest benefit. The report has identified a group of around £7.5 million people who are thought to be most at risk to the consequences of poor financial decision making. The GFA service itself is still very much a work in progress with the full review expected early in 2008. The interim report has so far revealed that a national service is indeed feasible, suggesting the benefits outweigh the costs by an estimated 3.5 to 1. In fact, an effective and affordable generic service is now considered an essential element for improving financial capability across the UK, although it's likely the name will change to something a bit more consumer-friendly! Of course, here at The Fool we believe that we're offering high-quality generic advice right now. However, too many people out there are still making poor financial decisions so we welcome any proposal that can increase financial education amongst the UK population. Let's hope that we get a GFA service sooner rather than later. More: Visit our discussion boards for jargon-free advice from our community members.