Money Guidance branded ‘an absolute fantasy’

Money Guidance may struggle to succeed because the cost of the scheme has been drastically underestimated, according to IFA-owned wrap Nucleus. Firm chief executive David Ferguson says the brainchild of Aegon UK chief Otto Thoresen would require hundreds of millions of pounds worth of investment every year to work, far more than has been earmarked for the scheme.

Money Guidance, unveiled as part of the Thoresen Review in March, pledges to offer free information and guidance for consumers via telephone, email and in visitor centres, among other mediums.

The review estimates the scheme will cost in the region of £49m a year to be split equally between government and financial services companies.

But Ferguson says this financial calculation is well short of the mark and argues its creators may be “scared to say how much it is going to cost”.

“I think it [Money Guidance] is an absolute fantasy,” he says.

“There’s definitely a place for educating people at a general level, but I just can’t see the economics of it. It’s on too small a scale.

“If they said we’re going to invest £300m for the next five years then I can see a positive impact. It’s almost like they’re too scared to say how much it’s going to cost. It is a drastic underestimation. I believe in the principle of it, obviously, but it is going to be very expensive.”

The Review estimates the service will generate £5bn in benefits for the financial services industry, £6bn for the Government and £15bn for consumers. It is believed the service will be used by around four million people a year.

Thoresen has called the service the Money Guidance scheme because he says consumers would not know what ‘generic’ means in this context and believes the term ‘financial advice’ would deter them from seeking help.

He said the new service should be sales-free and focus on giving people information and guidance on budgeting, saving and borrowing, protection, retirement planning, tax and welfare benefits, and jargon busting. It should stop short of recommending specific products.