Introduction
In this review, I want to cover the Money Advice Service, a government-backed financial advice service that has run in the UK since 2011.
Although the organisation is officially part of the Department of Works and Pensions, it has always been considered to be semi-independent of government.
In other words, the brand of the Money Advice Service has traditionally been one that has attempted to remain independent and to be seen as offering impartial advice that is outside of any officialdom.
However, I want to delve a little deeper into what the Money Advice Service offers, not least since the government made major changes to the service following an in-depth review into it in 2015.
As of last year, the Money Advice Service was re-branded. Although you can still head to its website under the same .org.uk address, the Money Advice Service is now officially known as the Money and Pension Service.
This might make little difference to the average consumer in the UK who is looking for some basic advice on debt management or investments.
However, for more seriously minded investors, there have been a number of changes that are worthwhile taking on board about the alterations to the way in which the entire service is run.
I will cover those later in this review but first I want to explain what the Money Advice Service is and why the UK government felt it necessary to set it up in the first place.
I will also cover many of the plus points that the service has definitely got going for it before delving a little deeper into some of its drawbacks.
As ever, I am happy to offer more in-depth and personalised advice, something that the Money Advice Service – no matter how it currently styles itself – is not able to offer.
In short, if you are looking for some generic advice about your finances, then the government service may well be all you need. On the other hand, if you want information that will be tailored to your individual financial circumstances, then I am happy to offer that additional assistance.
Feel free to WhatsApp me or send me an email ([email protected]) and I will be only too pleased to help.
In the meantime, read on to find out more about the Money Advice Service in the UK and what it is good for.
A Brief History of the Money Advice Service
Before we get into the nitty-gritty of the service, it will be worthwhile looking back to the time when the Money Advice Service was first set up.
This will allow for a better understanding of the principles behind the service and what the UK government was trying to achieve.
From this, you will be able to form a view for yourself as to how successful, or otherwise, the Money Advice Service has been. Certainly, the government took a view when it carried out its aforementioned review and made a number of organisational changes.
To begin with, the Money Advice Service was originally planned as the Consumer Financial Education Body.
In other words, the founding principle of the service was one of financial education – not of personalised financial advice from the point of view of investment yields, at least.
The UK’s government had changed in 2010, largely as a result of the preceding global financial crisis which, to many people at the time, became known at the time as the credit crunch.
The coalition government that came into power that year decided that it needed to take a number of financial measures including those connected to consumer debt.
As credit was much harder to come by for many businesses as well as consumers, so the government felt it needed to help people handle their finances in what they saw as a more responsible manner.
This led to the initial idea for an education body. In the end, the approach morphed into one that was more service-led, the sort of thing that consumers could turn to elsewhere already.
The main difference with the Money Advice Service was that it would provide online guides and phone advice to UK residents for free.
When it launched in 2011, the service resembled a large-scale charitable operation that would help people one-on-one, mostly with problems surrounding consumer debt.
Such services were already on offer from organisations like the Citizens Advice Bureau and some local authority run projects but the Money Advice Service was designed to be a nationwide project that could cope with large levels of demand.
At the time, some independent financial advisors – and the professional bodies that represent them in the UK – were concerned that the Money Advice Service may create an uneven marketplace.
However, such fears were not realised as the government service tended to focus more on debt and state pension advice rather than helping people with private pension plans or spare capital to invest.
In 2012, a new law came into force in the UK that placed an additional onus on the Money Advice Service to provide better awareness of financial planning and greater knowledge about how to compare various financial services.
It also meant the Money Advice Service had to promote greater awareness among the public of risk in personal financial management and to educate them about handling consumer debt.
After the government published its review into the Money Advice Service in 2015, it made a number of recommendations. These included approaches that could lead to better consumer awareness about financial products that came at a lower cost to the government.
The report also recommended the wider debt advice services on offer from charitable institutions should be incorporated under a new steering committee chaired by the Money Advice Service.
Thirdly, and I think most crucially, the government’s report stated that the Money Advice Service should help to strengthen consumer awareness of financial information but that it should not seek to compete in what it called, ‘an already crowded market.’
In other words, the Money Advice Service should provide basic education and advice for consumers but it should not operate in lieu of a professional, independent financial advisor.
Although that lines up with the original idea of the service, it is important to note that the UK government felt it necessary to constrain the Money Advice Service so that it would only operate in limited areas.
Emphatically, therefore, the Money Advice Service is not an independent financial advisory service backed by the government.
It will provide advice that is adapted for individual circumstances, of course, but this is far from the sort of thing that investors, savers and borrowers can obtain from the independent financial advice market.
That said, I will now explain exactly what the Money Advice Service can do and, in particular, the areas where it is strong.
What Does the Money Advice Service Do?
The Money Advice Service operates in one of three ways. It provides educational services and financial tips over the phone, in face to face meetings and online.
By far the majority of the interactions that the service has with consumers these days are carried out online.
It has a freephone number which runs weekdays from 8am to 6pm although at busy periods waiting times can be long.
Phone services are not available at the weekend nor on bank holidays, as you might expect of a government-led service.
If you want face to face advice, then it can be tricky to arrange. Usually, a phone consultation will have to be arranged to establish whether or not you will qualify for the sort of additional services that are on offer when meetings are arranged.
Basically, only vulnerable individuals or people whose financial circumstances are in certain ‘high-risk’ categories can obtain this level of service. During the pandemic, obtaining face to face consultations has been even harder by all accounts.
Therefore, most people use the online services provided by the Money Advice Service. In the main, this means reading the information that is available on the website.
Both English and Welsh are supported by the Money Advice Service’s website and various information packs can be downloaded and printed in large script for people with visual impairments, too.
In addition to its written information, the site links through to the service’s YouTube channel. The videos it contains are helpful and offer straightforward information. Overall, their videos have been viewed in excess of 5.5 million times.
That said, you can find all the information on offer in written form if that’s what you prefer.
Personalised online support is offered in one of two ways, web chat and WhatsApp. The WhatsApp service is billed by the Money Advice Service as primarily for debt and pension advice although it is possible to obtain assistance in other areas of financial education, too, using it.
The web chat service is a bit fuller. This runs during the same time period on weekdays as the telephone-based service.
In addition, users can use the web chat service on Saturdays but only between the hours of 8am and 3pm.
Services Offered By the Money Advice Service
As mentioned, the primary aim of the Money Advice Service is to provide education and awareness to the British public on consumer finance issues.
The first thing it offers is advice on debt and borrowing. This is both for people who are in debt and looking to manage it as well as people who are considering taking out a loan.
The service covers credit cards, credit ratings, personal debt, mortgage debt and debt consolidation. The loan calculator tool on offer is genuinely helpful for comparing different debt scenarios.
In addition, the debt advice on offer has been updated to take into account indebtedness that has come about during the coronavirus contagion and the additional financial support that is on offer from the UK government at this time.
There is also advice available for householders explaining the main aspects of renting or buying a home. This covers various tenure scenarios as well as the basics of mortgages, including buy-to-let mortgages and equity release to name but two areas.
Another of the key aspects of the service is to do with budgeting and saving. The service tries to help people manage their income on a month by month basis, whether it is from earnings or universal credit payments.
In terms of savings, the information on offer is basic. Users of the service will get an understanding of the essential differences between a ISAs, National Savings and Investments and savings accounts but there are no commercial comparisons on offer, nor is there any detailed advice for people seeking a portfolio of saving investments.
A lesser-used advice service offered covers aspects of in-work benefits that UK taxpayers can take advantage of if their circumstances permit. This also covers the basics of self-employment and self-assessment taxation.
In addition, the Money Advice Service has plenty of information about pensions, including state pensions, company pensions and the rules surrounding taking money out of pensions pots.
The advice on offer about the private pension market and dealing with issues like working or living overseas is limited, however.
Family matters are also covered by the Money Advice Service. It can be a good place to turn to when considering setting aside money for children, dealing with a death in the family or when you need information about paying for care packages for disabled or geriatric family members.
In terms of consumer finance, the advice on offer is also surprisingly limited. Although generic advice about consumer finance is available, it tends to focus on the costs of running a car and certain aspects of travel only.
The only other area consumers can obtain advice is to do with the insurance market. Again, this is limited to fields like life assurance, pet insurance, household insurance and holiday cover.
No commercially sensitive recommendations can be made, however. It is more about equipping individuals with some of the skills they’ll need to navigate these consumer markets.
Free Financial Advice
Although the advice provided by the Money Advice Service is given free of charge, more often than not it is an overview and not of an in-depth nature.
The Money Advice Service itself recognises this and signposts its users to other places where free advice can be obtained.
The truth is that these are either charitable institutions or price comparison sites, neither of which are of great help to anyone who wants to really plan their finances around their life goals.
In the end, the Money Advice Service can only do so much. Its services may be free but for the majority of its users – many of whom will be on low incomes – that is all that they can afford.
It certainly helps to educate people about their options which may, of course, paying for professional advice.
Nevertheless, the only nod to professional advice the service offers is to mention that the Financial Conduct Authority (FCA) regulates financial advisors in the UK so consumers ought to check whoever they speak to is properly FCA-accredited.
Ultimately, the government scheme is there to support the financial services industry, not to compete with it.
The best way I can think of to illustrate this is by pointing out the Money Advice Service’s funding model. Essentially, it is paid for from a levy that is applied to operators in the financial services industry.
As such, it can complement professional financial and investment advice but it can never truly replace it. Anyone who takes their financial health seriously still needs the personalised advice of professionals.
Of course, this is what I do for a living, so feel free to contact me if you have reached the end of the line with the free advice you can obtain in the UK and feel you need are more expert approach.
The Pros and Cons of the Money Advice Service
There are plenty of good things to highlight about the Money Advice Service. They include:
- Free and unbiased advice.
- Useful information for low income families and people dealing with consumer debt.
- An educational service that has helped to improve the financial literacy of the UK since it was founded.
- Useful videos designed for people with literacy and numeracy issues.
- Helpful advice on investing for children in the UK.
- Support offered over the phone and online.
- Very handy calculator tools for working out loan repayments and comparing mortgage deals.
- A strong emphasis on budget planning and making money last.
- Consumer advice on how to buy cheaper.
- Good signposting to other impartial services available.
Nevertheless, the Money Advice Service has a number of drawbacks that cannot be ignored, such as:
- Because the advice offered has to be unbiased, it is of limited use when deciding how to invest.
- As a government-led service, the pension advice tends to revolve around state pensions, not private ones.
- The information on offer is designed to be simple so some of the subtleties of financial advice are missed.
- The guidance on offer is generic and is not tailored to individual circumstances.
- Anyone who has lived or worked for part of their career in another tax regime will find little advice to help them.
- In person support is very limited.
- No help is on offer on Sundays or Bank holidays.
- The whole service is more geared up towards debt advice and budgeting issues rather than investments.
- Obtaining advice can be a time-consuming business.
- Some of the advice that is given is so simplistic that it is of little practical use.
- Non-UK residents will find the general guidance helpful but of little help when it comes to pension and tax regulations.
Summing Up
Although the Money Advice Service was described by the former Chancellor of the Exchequer as unfit for purpose when the government reviewed it, the service has continued to operate.
To achieve this, the sort of services it can provide have necessarily needed to change. Part of this explains why it is now under the auspices of the Money and Pension Service in the UK.
However, this change was much more than a re-branding project. It meant that the Money Advice Service could henceforth only offer commercially unbiased information.
Although being independent of financial service providers is obviously a good thing when it comes to giving out impartial advice, this creates a problem.
To illustrate, imagine you were looking at two or three types of savings account and trying to establish through the advice on offer which one would suit your life goals, available capital and attitude to risk the best.
The Money Advice Service is duty-bound not to make any recommendation. It would be seen as too commercially sensitive.
On the other hand, a professional advisor could lay out the options and also make a specific recommendation that suits your stated aims.
In the end, this means that the Money Advice Service is of limited use. What’s more, it always will be.
In fairness, if you live in the UK and want to understand the basics of budgeting, car loans, credit card repayments or consolidating personal debt so that you can manage repayments, then the website has lots of useful information.
Obtaining more nuanced and tailored advice that takes into account the wider financial picture is virtually impossible, however.
Of course, you can obtain help that is adapted to particular circumstances but it will never be bespoke to your individual needs.
Even worse, obtaining even this level of advice is not easy and will usually mean hanging on the phone for a long time.
In addition, follow-up advice is not always possible to obtain, either. Certainly, speaking to the same advisor twice is nigh on impossible.
That’s why I’d recommend it only for what it is good at – basic guidance. For everything else to do with your finances, I am available to offer personalised advice.
Further Reading: RL360 Oracle Offshore Bond Review explores tailored financial solutions, similar to the comprehensive advice provided by Money Advice Service.
