Financial Advice and Guidance: Consumer Market

Jim Shannon Excerpts

Tuesday 9th January 2024 Westminster Hall

[Harriett Baldwin (West Worcestershire) (Con)]

I beg to move,

That this House has considered the consumer market for financial advice and guidance.

It is an absolute pleasure, Mrs Harris, that you are in the Chair for this debate on the consumer market for financial advice and guidance. I am very grateful for the opportunity to hold this debate, which follows up on a cross-party amendment I tabled to the Financial Services and Markets Bill a year ago. I am grateful for all the hard work done by officials from the Treasury and the Financial Conduct Authority over the past year under the leadership of the former Economic Secretary, my hon. Friend the Member for Arundel and South Downs (Andrew Griffith), who championed this cause. I am also grateful to the current Economic Secretary, my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), for taking things forward and for his support.

I welcome the proposals published in December for closing what is called the advice gap and completing the first part of the advice guidance boundary review. This morning, I want to cover three things. Why is this review important for our constituents? How will these changes help them? And what more can we do to help them? I will start with why this is important for our constituents.

Now more than ever our constituents need personalised help and advice about their financial situation, and when I say “help”, I do not mean just the billions of pounds of financial support that was given through the energy price guarantee, the money off electricity bills and so on. I mean the kind of help that will make our constituents more financially resilient over a lifetime.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Lady on bringing this debate forward, and I commend her for her work on improving facilities for providing financial advice and guidance in the consumer market—that has been noted in the House, and I congratulate her on that. I wholeheartedly support her view that we must give individuals and businesses the best possible opportunities to grow their wealth. Does she agree that we should particularly target help to smaller businesses that are looking to start up locally, to ensure that they can take advantage of high-quality and, most importantly, affordable services and advice to help them make informed financial decisions?

[Harriett Baldwin]

I want to limit my remarks today to consumers and their access to financial advice, but the Treasury Committee is doing an inquiry into access to finance for small and medium-sized businesses, and I encourage the hon. Gentleman to share with us any evidence he might have in that regard.

Our constituents need more personalised help to make them more financially resilient over their lifetime. We want them to be more prosperous, better informed and more able to prepare for the inevitable highs and lows of financial life. With the success of auto-enrolment, we now have millions more people taking personal decisions about saving for their retirement, possibly across a multitude of different pension schemes over a full working life. They need an expert hand to help them to make good decisions and yet, despite our world-leading financial services sector, it is surprisingly difficult to get help. That is because of the advice/guidance legal definitions.

Mrs Harris, I want to try out an analogy on you. Imagine a supermarket where, if you pay an up-front fee of several hundred or perhaps even several thousand pounds to join, you will, over your whole lifetime, be allowed to go into a section where you have a full choice of delicious, healthy food and other goods, offered at competitive prices. Someone will ensure that you are buying things appropriate for your age and dietary needs; they will suggest some terrific, easy-to-cook, healthy recipes and wonderful meal plans.

However, to make it worth paying the up-front fee, you have to buy exceptionally expensive goods or sufficient quantities, and only 8% of our constituents would in fact choose to pay the fee; everyone else in the supermarket chooses to avoid it. They wander round the generic aisles of the supermarket. They may see some generic NHS advice about healthy eating or something on the supermarket website. They pay much higher prices for the same range of goods and often choose the unhealthy and expensive options. They even find scam and rogue options that scam them out of their shopping money altogether, because anyone can set out a stall in the supermarket I am describing.

It is a slightly stretched analogy, but I know that you know what I am getting at, Mrs Harris. The quality and cost of financial advice in this country mean that we have created a marketplace where only the richest 8% of the population choose to shop and benefit from the healthy financial choices that our excellent financial services firms can give.