What now for the Money Advice Service?

The Money Advice Service has been on a bumpy ride ever since it was set up three years ago. While few would argue against its noble intentions - to improve finanical literacy in the UK and help consumers make better financial decisions - it was a huge challenge and many millions of pounds later it's hard to make the case that it has made much progress.

The latest killer blow to the organisation is the news that it won't be involved in the delivery of financial guidance to retirees - a key plank of George Osborne's pension reforms. It's not as yet clear why MAS has been excluded, but it begs the question: if a government-backed body called the Money Advice Service can't be trusted to deliver the biggest national money advice project in our country's history, then what exactly is its purpose?

The wrong exam question

MAS was the brainchild of Otto Thoresen, now the director general of the Association of British Insurers. Having been tasked with the challenge of finding a way to deliver generic financial advice to the masses, he suggested the creation of an online and telephone based service, which people would know they could trust as it is backed by government.

The Money Advice Service is exactly that. But it's always been my view that Thoresen was set the wrong exam question. What Ed Balls should have asked Thoresen was how we can get the UK population to be more finanically literate and help them make better financial decisions. The result may well have included elements of today's Money Advice Service, but it would also have been forced to address the issue of how you make people engage with financial issues, rather than leaving things until it's too late.

MAS has got a great website, with information on just about every area of finance that you can think of. But as a government-backed agency (albeit now funded by industry), it trips over itself to never talk in definitive terms. Every MAS guide contains pros and contains cons - whereas what consumers need is something closer to a roadmap. This is not easy to do, and would inevitably put noses out of joint in the industry - but the more balanced the advice, the less useful it is. Most people want to be told to do in as simple terms as possible. They don't want a long list of their options - and if they're given that, they're less likely to do anything.

Pulling heads out of the sand

The second issue is that the creation of an advice service does not in itself address the issue of apathy. Consumers need relevant, targeted advice at the point of need. In theory, that's exactly what the government's pensions guidance scheme will deliver when it is launched next year - a project that MAS will not be involved with.

Rather than offering a free phone line that very few people call, I'd like to see MAS getting into every workplace in the UK, talking to people about pensions and insurance when they start a new job, or finding ways to get to families when they have a child or buy a house. These are the times when people are in the mood to talk about money, and the times when they're at greatest risk of making a poor decision.

Although MAS has been left out of the the pensions guidance project, it may end up showing MAS the road to survival. If the Pensions Advisory Service and Citizens Advice are effective at engaging people around their retirement options, there should be plenty that MAS can learn and apply at other life stages.

One thing's for sure, however. If MAS don't start finding ways to demonstrate their worth both to industry and government, they will leave themselves at risk of being massively scaled back. That would be a great shame as even in their current guise, they offer some useful impartial assistance to people in a market dominated by vested interests.