CML news & views

When is advice not advice? That was just one of the questions that we were left with from the inaugural conference of the new Consumer Financial Education Body (CFEB) held recently in Cambridge, with financial secretary Mark Hoban as its keynote speaker.

CFEB, which was the financial capability division at the FSA prior to becoming an independent body in April, aims to help consumers manage and understand their finances better. Its statutory objectives are to enhance understanding of financial matters (including the UK financial system) and improve the ability of members of the public to manage their own financial affairs. It will work under the auspices of the new Consumer Protection and Markets Authority in the future.

At the conference, Mark Hoban set out the coalition government’s vision for a responsible approach to personal finance with three key objectives:

• improving the advice available to families on how to manage and plan their finances;
• presenting them with straightforward financial products; and
• making sure they get better information on which to base their choices.

Delivering these objectives will rely in part on CFEB, which is piloting a national financial advice service. This will cover various money matters online, over the phone, and face to face. The idea is “to prevent crises before they happen and enable consumers to cultivate a mindset of personal responsibility.”

CFEB speakers used the word ‘advice’ liberally throughout the conference. They explained that, to them, the word meant a mixture of giving guidance and helping people make their own decisions. One speaker suggested that, while acknowledging the particular meaning and requirements of regulated advice, it was desirable to “take people as near to the boundary of regulated advice as possible”. Among several intriguing debates prompted by questions from the floor was the view from one speaker that a consumer adviser would ideally be able to express sentiments along the lines of: “If I were in your shoes, would you like to know what I would do?” Given the tightly drawn nature of regulated advice, this is clearly dangerous territory, and suggests that CFEB will need to keep a tight rein on the well-intentioned services being delivered.

Mark Hoban was keen to emphasise that the annual family financial healthcheck, announced by the government at the Budget, will be a key component of the national financial advice service. He said: “The healthcheck will help families and individuals get into the habit of taking a thorough look at their finances and will show them where they are most at risk, how they can regain control and how to plan for the future. The healthcheck will give people a ‘prescription’ that will offer clear advice on what they can do to improve their financial situation now and for the years ahead.”

During the conference, CFEB outlined a strategy of identifying important life stages that can be used to engage people when they are most receptive to dealing with their finances. It is currently focussing on redundancy and retirement but, with the biggest purchase a consumer will normally make in their lifetime being a property, this important life stage is a good starting point to encourage consumers to take a look at their finances.

Through research, CFEB has found that the topic of mortgages comes up more during telephone conversations and on-line sessions than during face-to-face meetings. To promote its mortgage service, it has started an online Stay on top of your mortgage campaign concentrating on how people would cope if interest rates went up or something unexpected happened to them. The campaign encourages people to use the ‘mortgage toolkit’ on the moneymadeclear website where there are five, 15 or 30 minute versions to help consumers understand their mortgage options, plan ahead and give their finances a health check.

CFEB is very keen to work with financial services providers and trade bodies to reach consumers. The CML has already provided a highly visible signpost from its consumer website to the “stay on top of your mortgage” section. And lenders already send CFEB’s arrears guide to all borrowers with three months of arrears. There may be further options for lenders to supply other relevant CFEB mortgage guides when customers apply for a mortgage or talk to their lender about their current loan.

The CML supports moves to encourage financial capability. After all, responsible borrowing is the corollary of responsible lending, and can only be achieved if consumers have the necessary understanding to make good financial decisions. The work that CFEB is undertaking will need to tread carefully through the regulatory landscape, and has a long way to go. The FSA’s track record in delivering widespread financial capability programmes shows just how challenging the task is. But the prize is significant. A successful mass financial capability programme could transform the relationship many in this country have with their finances.