3 March 2008

Speech by Otto Thoresen

Check against delivery

1. Thank you for that introduction, Yvette.

2. And thank you all for coming here so early in the morning. I feel very privileged to be standing here today in these splendid and historic surroundings to announce the conclusions and recommendations of my review.

3. Maybe this occasion isn't as momentous as the one that gave this room its name, but I like to think that we could, in our small way, be making history here today too.

4. Because I am today presenting to the Government the blueprint for a service that I believe has the power to transform people's lives. And to deliver substantial benefits to the financial services industry, the Government and society as a whole.

5. Today I will be making ten main recommendations. They are the result of a year of analysis and evidence- gathering, which has included running two consumer prototypes to test our ideas in action. Together the recommendations set out my vision for a national money guidance service, to provide the people of the UK with the knowledge, understanding, and confidence to make better decisions about their money.

6. But before that, as Yvette hinted, I want to explain why the final report of the Thoresen Review of Generic Financial Advice doesn't talk about "generic financial advice".

7. I prefer to call it "Money Guidance" because I think those words more accurately describe what we are talking about. It is "guidance" because no-one knows what "generic advice" means. nothing to most people. And it is "money" because for many people the word "financial" is a turn-off.

8. As a society, we cannot afford that turn-off reaction. We are living in a world where people are being expected to take greater personal responsibility for their long-term financial well-being. Where there is increasing turbulence in financial markets. Where we have recently seen flooding which has affected people's lives and livelihoods fundamentally.

9. Where the consequences of making bad decisions about our money can be grave. In particular, when people are living longer, bad decisions could mean a retirement full of money worries instead of a comfortable and secure third age.

10. That is why I believe that good money sense needs to be as much part of people's lives as healthy eating and keeping fit. I don't claim to be saying anything original with that statement. The emphasis on financial education within the curriculum, and the FSA's National Strategy for Financial Capability have started to address the issue. But all of us here have already missed the bus for financial education at school; and the National Strategy cannot fill all the gaps. I believe a national Money Guidance service could fill an important gap.

Recommendations

11. So what is "Money Guidance"? Put simply, it is the guidance that people need on the money matters that shape their everyday lives. My report recommends that it should cover:

Helping people budget their weekly or monthly spending;
Giving them guidance on saving and borrowing, and insuring and protecting themselves and their families;
Giving help with retirement planning; and
What I call jargon -busting: demystifying the technical language that we in the financial services industry far too often use.

12. There are two things Money Guidance definitely is not. First, it is not specialist debt advice. That advice already exists, and a Money Guidance service would need to develop ways of co-operating with the organisations that provide it.

13. Second, Money Guidance does not make specific product recommendations that would take us over the boundary into regulated advice. Where buying a product or taking regulated advice is the right solution, the service will need to be able to refer people smoothly and effectively to the regulated sector. Having first equipped them with the skills and confidence to engage with the sector on a more equal footing.

14. I have heard arguments that if we are not able to make clear statements about what products they ought to buy, people will in fact do nothing. But I am satisfied that Money Guidance can operate effectively in the space outside regulated advice, and that is my recommendation.

15. My next recommendation is about the ethos that ought to lie at the heart of a Money Guidance service. It reaffirms the five principles that I put forward in my interim report. I see them as crucial to enabling a Money Guidance service to build trust, user advocacy and sustainability.

16. The principles are:

First, that customers must feel the service is on their side. Impartial from the Government and the financial services industry.
Next it must be supportive. Supporting and guiding people to make their own decisions.
Then - importantly - it must be preventative. Not, as I have already said, to deal with crisis, but to help people budget and plan for today and the future.
And it must be universal. It must be available to everyone who wants to use it. To ensure that it is universal it should - certainly in the medium term - be free to the users.
And finally, it must be sales free. Money Guidance is not a product sales channel, though it could - and often should - result in people buying a product or taking regulated advice. But people have told us that one thing they don't like is feeling that they are being given the "hard sell".

17. Those principles underpin all of my recommendations about the design of the service.

18. My next recommendation - which I regard as central to the successful delivery of a Money Guidance service - is about partnership. I have been convinced of the need for a partnership approach from the very start. My conviction has grown throughout the review, as I talked to, and saw at first hand, the impressive range of organisations which exist to deliver help and information to people across the nation. I know that many of them are keen to help deliver Money Guidance.

19. I am strongly recommending that the delivery model for the service should be based on partnership, with a central body to direct the strategy, set standards and deliver some services, but with much of the service actually delivered by accredited partner organisations. To me it makes sense to build on organisations with a local presence, and with established networks for reaching out to customers, rather than expecting the central body to develop new face-to-face facilities. And I also believe partnership should be built in at the strategic level.

20. I also recommend that the service delivered through that partnership will need to use a range of channels. Primarily the Internet, the telephone and Face-to-Face settings. But in the future no doubt making use of the opportunities provided by new technology.

21. While I am on this subject, a word about how partnership might apply with commercial organisations. A number of firms have told me they would like to offer Money Guidance. Many believe they already do offer something very like Money Guidance. And research - for example - by AXA has suggested that if people get guidance in a situation where they can act there and then, it is more likely to be more effective than if they have to take several steps to bring things to a conclusion.

22. I have no objection to commercial firms becoming an accredited part of the Money Guidance "family" IF they show that they can meet the principles I have just described. Particularly the principle of impartiality. This is something that needs to be tested in the next phase of development.

23. My next recommendations are about how to attract customers to the service. I have said from the outset that Money Guidance is a service people need, but do not yet realise that they want. It is not a case of "if we build it they will come".

24. But we have learned from our research - from running our consumer prototypes, and conducting surveys and focus groups - that we are pushing at a door that may be more open than we think. 75 per cent of the people we surveyed said they would use a "national information and guidance service for personal finance issues".

25. And from the users of our prototypes we heard things like: "When they explained all the things they did...I said , where have you people been hiding, this information should have been available to us a long time ago".

26. We should still be under no illusion that we are asking people to make significant changes in their behaviour. This is not something that happens overnight. But we know it can be done -, for example, look at recent health campaigns such as "5-a-day", and on smoking.

27. My recommendation is that that the marketing strategy for a service must recognise the need to appeal to a broad range of different groups. The strategy will need to include national and regional marketing; it will need to work with trusted intermediaries; and it will need to build on social networks and viral marketing techniques.

28. And also - because Money Guidance is a description, not a brand - I am recommending that the Government ensures that a new brand is designed. One which encapsulates the principles of the service, in particular that it is "on my side" and is "sales free".

29. So I have described what I think a service should look like. Now I want to talk about the practical steps to make it a reality. I have talked about a partnership approach led by a central body, but not so far said what that central body should be. I received a number of representations on this. Some people thought that an entirely new organisation would be the best way to ensure that the service was truly impartial from Government and Industry. Others thought that the FSA was a logical home for the service.

30. On balance I recommend that in the short to medium term the FSA should be the body to take Money Guidance forward. Because it meets the principles I have set out. It is independent from the financial services industry and the Government, as well as being recognised as a world leader in financial capability. It has a track record of delivering to the public and working in partnership with other organisations through the National Strategy for Financial Capability.

31. Now the costs of the service. The work we have done suggests that an effective service, on the design model I have described, with 4 million users a year, would cost around £49 million a year in today's prices. That should be set against benefits to consumers of over £15 billion over the next 50 years, as well as benefits that could be as high as £5 billion to the financial service industry, and £6 billion to the Government, over the same period. In view of these benefits, the Review recommends that the costs of providing the service should be split equally between Government and the financial services industry.

32. I also recommend that a levy would be the most fair, transparent and sustainable way of securing the industry's share of funding the service. We also recommend that the contribution base should include firms regulated by the FSA - which already pay towards financial capability; consumer credit firms regulated by the Office of Fair Trading; and National Savings and Investments.

33. That covers nine of my ten recommendations (I hope you've been counting). So, what happens next?

34. Setting up a fully-fledged national service will take time. My last but most important recommendation is that, as soon as it has had the opportunity to consider this report, the Government should set up a Pathfinder for the service, so that the momentum created by the Review is not lost. I believe a large-scale Pathfinder that would enable my recommendations to be thoroughly developed and road-tested should last around two years and would cost around £10-12 million. I'm confident that such a pathfinder will validate my blueprint and act as a springboard to a full national service.

Conclusion

35. For me this is the end of a journey. One that has been exciting and challenging. One where I have learned a lot. One that I embarked upon because I believe passionately in the need for this service.

36. But though this is the end of my review, it is far from the end of the road. Given these surroundings, I can't resist saying that "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning". My report establishes the case for, and sets out the blueprint of a service that has the power to make a real difference to people's lives. I am now handing the baton on to the government. I very much hope they will carry it forward to implementation.