The Financial Services Consumer Panel today called on the Government and the Financial Services Authority (FSA) to establish a new service which will offer financial planning advice to the majority of consumers, including those on middle and lower incomes.

In its second response to the FSA's Consultation Paper 121 on reforming the ‘polarisation' rules, the Panel said that financial planning advice will be vital for consumers as they are having to meet the challenge of taking more responsibility for their own future.

Consumers need a basic steer on what type of products may or may not be suitable for them, but there is a disincentive for commercial advisers to give financial planning advice to those who may not buy products, or where the transaction is likely to be of low value. The Panel believes that one way to resolve this is to provide generic financial advice via a separate service and to link this with the selling of 'safe-haven' products.

Only a centrally funded service can offer detailed financial advice to all. The Panel's proposal is for an advice service which would help consumers understand their needs, whether these are saving more, paying off debts or taking out a life protection policy. It would not recommend specific branded products. The consumer could then take the diagnosis and prescription to firms offering safe-haven products. Firms would face reduced costs since they would not need to carry out a ‘fact find' in order to fulfil the regulatory requirement to ‘know your customer'. Both the Government and the finance industry stand to gain from a service like this. Such a service would be more successful in reducing the savings gap than current tax incentives to save. The service should therefore be funded jointly by Government and the industry. The first step should be a project to assess the feasibility and costs of different options for delivering the service.

Colin Brown, Chairman of the Panel, said:
‘People are being pushed to take increasing responsibility for planning their own financial future. They need a trustworthy advice service which isn't just part of the commercial sales process. It needs to offer financial health checks that go beyond savings and investments and include debt, benefits, and protection insurance. The National Consumer Council and the Consumers' Association are also calling for an accessible new financial advice service which handles all aspects of people's finances. The Government and the FSA should heed this clear message from us all.'

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Notes to editors