For the RDR to succeed, it is essential for retail investors to understand the value of independent advice to the extent that they are willing to pay for it.
However the recent advertisements aired by the Money Advice Service (MAS) states "Our advice is independent and unbiased. Oh, and it is free. How is that for a breath of fresh air?"
Sheila Nicoll, director of conduct policy at the FSA, is on record as defending the advertisements, saying "It is worth noting the MAS is very clear that it is generic advice that it is providing. What the MAS is proposing is actually pretty complementary to the RDR."
However, I am struggling to interpret the advertisement as meaning anything to retail investors other than that independent financial advice can be had for free. That seems to directly undercut the FSA's insistence that Independent Financial Advisers must charge transparently for advice. Of course when you look at what MAS is actually offering, you will see it is vastly different from what is offered by a good IFA, but how many consumers will get that distinction. This is especially worrisome in that one of the starting points of the RDR is that consumers have failed to make these distinctions in the past.
The MAS is an independent body funded by an industry levy, which will be £3.7m this year, and to which IFAs must contribute. The advertisement is said to be part of a £4m campaign. I imagine it is particularly galling to IFAs that they are forced to pay for an advertisement which undermines their own business.
You can watch the advertisement for yourself below:
I have also been to the Money Advice Service website and done their financial health check myself. I must say I was somewhat underwhelmed: after answering a long list of fairly general questions, I was presented with a page of advice which appeared to be so generic I was left wondering why they'd not just presented it without putting me through the trouble of answering all the questions.
So I decided to explore the website further. The section on budgeting looked interesting, so I clicked on that. That took me to a parent's guide to money. Luckily I am a parent - but I might equally not have been. Looking around the rest of the site it contains a wealth of information. As the sort of person who generally takes an interest in these sorts of things, it is not obvious to me that this information was not already available elsewhere. Although it is handy to have it all in one place, one does wonder if that convenience is worth the £3.7m price tag this year.
I am generally pretty supportive of the RDR. The industry must evolve in order to improve outcomes for customers. But I can't help feeling that the MAS and it's TV advertisement are not a step in the right direction.
Update 14/7/2011: The Advertising Standards Authority will decide in the next week whether to investigate the advert after it received 41 complaints, mostly from IFAs. (See more)