4.3.7 Guidance and support – the Money Advice Service
One of the FSA’s original responsibilities was to promote public awareness about financial matters. The role here was educational, with the FSA promoting public understanding of the nature and risks of products, and of rights to (and the necessity of) access to information and advice about them.
In October 2010, this objective of ‘public awareness’ was transferred from the FSA to the new Consumer Financial Education Body (CFEB), subsequently renamed the Money Advice Service (MAS) in April 2011. This new body has now taken responsibility for helping consumers understand financial services and manage their finances effectively. The MAS provides free and unbiased advice to consumers. The MAS operates independently from the PRA and FCA, although the two regulatory bodies have a joint statutory oversight of its work.
In 2016 it was announced that MAS was be abolished and replaced by a new advisory body. It was also announced that two pensions advisory bodies - Pension Wise and The Pensions Advisory Service (TPAS) - were to merge to provide a single source for advice on pensions. Subsequently and after a period of consultation it was announced that a new Single Financial Guidance Body would be established from 2019. This new body in effect combines the previous work and missions of MAS and the pensions advice bodies.
In this video Caroline Rookes, chief executive of the MAS, talks about the work of the organisation in helping the public with financial management.
Download this video clip.Video player: ou_futurelearn_managing_my_journey_vid_1118.mp4
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Transcript
MARTIN UPTON
Hello there. I'm here with Caroline Rookes, who's Chief Executive of the Money Advice Service. Caroline. How does the Money Advice Service go about helping consumers with their personal finance issues?
CAROLINE ROOKES
It does it in a number of ways. We have quite a broad remit. We were set up by statutes, essentially to help people manage their money better. In the first place we provide money guidance. We provide that through a website but also over the telephone. And what we're doing there is trying to help people to make good financial decisions. So this might be buying a house, buying a car, or it could be because they're reaching a particular life point. They're facing having their first child, or bereavement. And we try and help them to get through those decisions or those life events.
The other thing we do is we are the biggest single funder of free debt advice. So we fund debt advice sessions for people. But we also have a responsibility for coordinating the whole of the free debt advice sector. So what we mean by that is working with other debt advice providers to try and increase the amount of debt advice that's available. To increase the quality, to improve the consistency, and just generally to ensure that the debt advice sector operates as efficiently and effectively as possible.
And then finally, in October we published a financial capability strategy. And this is a 10 year strategy for raising the financial capability of the UK, which on the whole remains stubbornly low. And the way we do that is by leading organisations from across all sectors, industry, government, regulators, charities, to work together to raise financial capability. We support, we provide evidence, we provide evaluation, and we provide leadership.
MARTIN UPTON
I understand that when you do your work, you do a lot of work on what's called behavioural economics, which looks at the impact of personal behaviour on financial decision making. Can you tell us more about that?
CAROLINE ROOKES
Yes. I think more and more organisations are using what we call behavioural economics. And it's really the way that the science of understanding what people do. We've moved away from believing that everybody acts rationally in all situations. And we know a lot more about what makes people take action in what circumstances.
So in the context of our money guidance, for example, we know that not only the message but the messenger is important. So we work with other organisations that are interacting with people that people trust to try and get messages across about money. We know that people need to hear messages just in the right time. So there's no point giving people a long lecture one week and expecting them six months later to act on it. So we have to get information guidance to them as and when they need it.
So again, it's good to work through partner organisations. So for example, working with supermarkets. So that when people are going about their daily business they can pick up messages about managing money, budgeting, saving, that sort of thing.
MARTIN UPTON
What's the picture in the UK? What are the big personal finance issues? What are the things which are causing you the most concern?
CAROLINE ROOKES
In data terms, there are 12 million people not saving enough for their pension. There are over 20 million people that couldn't manage a financial shock of some sort. There are 8 million people with problem debt. And that isn't just a large mortgage. That's people who have problems. Either they failed to pay bills or they themselves say they have problems. And of that 8 million, only one in six are seeking help.
So for me the statistics are pretty depressing. But I think, probably, there are a number of factors that are affecting that, which are quite worrying. The biggest one I think being social norms. People don't talk about money in this country. They're inhibited talking about money. And that means that they don't want to put their hands up and say that they've got financial problems. They're reluctant to seek financial advice.
And the second thing that worries me, I think as much as anything, is the culture we have at the moment. Which is spend today and worry about tomorrow when it comes. We live in a consumer society. People are inundated with advertisements for things to buy. And credit is easy to get. And so people spend. That's what they do. That, if you like, is what behavioural economics tells us. That people will live for today, not for the longer term. And so changing that is going to be a very difficult task for us.
MARTIN UPTON
It sounds like a huge task. I mean changing a culture. Changing a mind-set. How on earth are you going to go about that?
CAROLINE ROOKES
It's very difficult. I think there are a number of ways that we can tackle it. First and foremost, the children of today are, of course, the adults of tomorrow. So if we can instil good money habits in children when they're small then hopefully, as they get older, they will behave well when it comes to money management. But there are whole swathes of the adult population that have missed out on that financial education. And we need to help them today.
And I think the only way we can do it is by working across all sectors so that we're working with industry, we're working with government, we're working with regulators. And when I say industry I don't just mean the financial services sector. But supermarkets, all sorts of organisations. If we can work together to try and get a consistent set of messages across. That's very much what we want to be doing next year.
We're going to be piloting a money management programme where we work with a whole range of organisations to try and get messages across to people, and tips across to people, about how to manage their money better. But I do not underestimate the challenge. This is a huge, huge task. And it's one that many developed countries are facing at the moment. We're not alone in trying to tackle this.
MARTIN UPTON
What about the role of employers in providing financial education? Do you think employers should be doing more to help you?
CAROLINE ROOKES
That's an interesting question. I think my personal view is yes. Employers did used to do quite a lot more I think, when it came to financial issues. And gradually, over the years, employers have moved out of that space.
And I think my view is that with the introduction of automatic enrolment in 2012. It's brought pensions back into the workplace. And I think there's an opportunity there to link that to wider financial issues. Because I don't think people should see pensions as a one-off single issue. Pension is about saving all through your working life to make sure that you have the finances you need, as well as thinking beyond that.
So I think it would be great if employers did provide much broader financial guidance. And that we made use of the workplace to save beyond the savings for a pension. So I'm not suggesting that we introduce automatic enrolment into a rainy day savings plan. But the payroll could be used to makes deductions from people's salaries and wages to help them to build up that rainy day savings pot that they need in order to meet those unexpected bills when they come.
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