SUBMISSION: Our response to the Public Financial Guidance Review

February 14, 2017

The Financial Inclusion Commission (FIC) is an independent body of experts and parliamentarians (cross party) which aims to make financial inclusion a national priority. Our ground-breaking report, launched in March 2015, proposed the measures most urgently needed to extend access to financial services to the excluded.

The FIC wants to see a financially inclusive United Kingdom in which everyone enjoys decent financial health. Financial inclusion could play a pivotal role in delivering the Government’s objective of building a country that works for everyone.  In our view, that should include a financial system that works for everyone.

An important part of this is successfully delivering public financial guidance to audiences when they need it. Evidence to the FIC indicates there is a significant problem with people not engaging with existing advice.

Our key recommendations are:

The new body should have regard to financial health in general, giving clear leadership, but working alongside the government, regulator and industry as part of a wider approach to supporting consumers in using financial services.

  • As part of this, the new body should have a role in promoting financial inclusion without having direct policy responsibility for it.
  • We believe that government should have policy responsibility for financial inclusion, by creating a Minister for Financial Health.
  • The new body already has a broad remit and adding responsibility for financial inclusion may distract from its focus on debt services, and on measures which prevent people falling into unmanageable debt or being unprepared or poor in retirement. The body should aim to develop a better informed ‘demand side’ (consumers) while regulators should look after the supply side (financial products, services and programmes).

Answers to Consultation Questions

Q1. Do people with protected characteristics under the Equalities Act 2010, or any consumers in vulnerable circumstances, have particular needs for public financial guidance or difficulty finding and obtaining that guidance?

Digital and technological developments are changing not only financial services, but modern life too. These changes offer a potentially ground-breaking opportunity to promote financial inclusion, but they also present the risk of creating new barriers for those who are excluded.

As the Commission found in our 2015 report, Financial Inclusion: improving the financial health of the nation, many people do not have access to online services owing to a lack of affordability or of digital skills, low connectivity, illness or disability. 8.6 million adults (16% of the population) remain ‘non-users’ of the internet and they are more likely to come from groups at greater risk of financial exclusion. The move toward digital financial services risks creating yet another barrier for those already excluded. That said, more and more people are accessing technology through different channels (e.g. smartphones, tablets), potentially increasing the likelihood that online services will support financial inclusion.

Q2. Do you agree that these areas capture what the broad role of the SFGB should cover?

The Commission do not completely agree that these areas capture the broad role the SFGB should cover. See the answer to Q3 for further information.

Q3. Do you agree that the SFGB’s financial capability initiatives should focus on priority groups such as those who are most in need of support to build resilience?

The Commission agree that there is a need to target the limited resources available to where the need is greatest. However, the emphasis on “vulnerable groups” is inappropriate. As the evidence in our 2015 report shows, people need guidance at particular points in their lives when they may be vulnerable to the consequences of poor financial decision-making. For example, this might be the arrival of a child, family breakdown, unemployment or starting a job, or approaching retirement.   

Moreover, financial education for young people, especially at a primary level, is not about vulnerability but about raising financial capability in the population generally.

Q4. Do you agree that the SFGB should have a strategic role, working with the financial services and pensions industry and third sector organisations to improve financial capability?

The Commission agree that the SFGB should have a strategic role and provide leadership and coordination. The partnership model was a key element in the success of the earlier (FSA) National Financial Capability Strategy and the purpose should be to work with organisations both in the commercial sector, and not-for-profit sectors.  The former should benefit from greater financial capability and be a logical source of funding; the latter can perform the important role of acting as ‘trusted intermediaries’ between the industry, regulators and consumers.

Q5. How might the SFGB develop its understanding of what works and usefully contribute to sector wide research?

The What Works Research programme funded by the Money Advice Service should provide some valuable insights into the most effective programmes.  The new body needs to build on the findings of this research to target resources effectively, and may commission a similar programme in the pensions field.  While there is a clear overall case for improved financial capability yielding better outcomes for individuals, businesses and the economy, it can be difficult at a specific level to see how centralised activities have led directly to those improvements. There are many diverse factors which might have led to people becoming better engaged with their financial affairs.  The SFGB should work with Government and industry to develop widely accepted measures of effectiveness of the different initiatives.

Q6. In what ways could the SFGB co-ordinate and add value to the provision of financial education?

There is now a commitment to the provision of financial education in secondary schools, but no new government funding to support it.  The SFGB should work with schools, the industry and the not-for-profit sector to provide support at both primary and secondary level, using the “What Works” research findings to assess whether direct delivery by specialist trainers or support for teachers is the most effective model.

Q7. Are there other delivery channels that the SFGB should consider that would be effective for delivering to consumers?

The SFGB should work with, and provide resources such as funding, toolkits and training to, those organisations in the public, private or not-for-profit sector who can deliver financial capability and inclusion support to the client groups they already work with and are trusted by.  SFGB could provide a valuable role in stimulating, coordinating and resourcing this work.

Q8. How should the SFGB ensure that it engages consumers at the right time for them?

There is a need to identify the ‘teachable moments’ during people’s lives when they will be most in need, and most receptive to financial guidance, and identify ways to ‘reach out’ and help people at those moments.  These will be those life stages when people’s circumstances change and when the gap between disposable income and expenditure is greatest. Examples of this are outlined in our answer to question 3.

Q9. Do you agree that the SFGB should be able to exercise some flexibility in the way funding is directed?

The Commission strongly agree that the SFGB should be able to exercise some flexibility in the way funding is directed.

Q10. Would these proposals have any impact on the delivery of public financial guidance in Scotland, Wales or Northern Ireland? 

The Commission does not have a view on this, but the evidence we gathered from around the UK demonstrated the differences in policy and provision in each of the devolved nations, which the new body shoud take into account in tailoring its own programmes.  MAS has exceptionally effective outreach teams in Scotland, Wales and Northern Ireland and we would like to see these retained and strengthened under the new body.

Q11. Do you have any other comments about the proposed delivery model and consumer offer?

As set out in the introduction, the Commission’s key recommendations are that government should play the key role in leading efforts in financial inclusion through the creation of a Minister for Financial Inclusion but that:

  • The new body should have regard to financial health in general, giving clear leadership, but working alongside the government, regulators and industry as part of a wider approach to supporting consumers in using financial services
  • As part of this, the new body should have a role in promoting financial inclusion without having direct policy responsibility for it. We believe that government should have policy responsibility for financial inclusion, by creating a Minister for Financial Health
  • The body already has a broad remit and adding responsibility financial inclusion may detract from the focus on debt services. It should aim to develop a better informed ‘demand side’ (consumers) while regulators should look after the supply side (bank products and programmes).