ENGAGEMENT Closing the Financial Advice gap

							                                                                                    31 May 2006

 The Resolution Foundation is an independent, not-for-profit research and policy organisation
   set up in October 2005 to provide new thinking on how people can access and use the
             financial system and to contribute to relevant public policy debates.

     NEW RESEARCH BACKS CASE FOR NATIONAL FINANCIAL ADVICE SERVICE

A new report published today by the Resolution Foundation calls on the Government and the
financial services industry to jointly fund an independent financial advice service for people on
low incomes (1).

The report, which is published as MPs are preparing recommendations on this subject as part
of a wide ranging parliamentary inquiry (2), suggests that a telephone-based advice service
could be delivered to around 2 million people a year at an annual cost of around £30 million
(3).

90 per cent of people interviewed for the Foundation’s research said they would use a
telephone-based service. 80 per cent said they would support a service funded jointly
by the Government and the financial services industry, as long as it is independent (4).

The report is based on research which identifies 12 million people in the UK on low incomes
who the Foundation says are falling into a ‘financial advice gap’.

12 million adults in the UK are on below median incomes and receive no more than 20
per cent of their income from welfare benefits. A further 3 million elderly people are on
         below median incomes and do not receive means-tested benefits (5).

As the Foundation has previously identified, this income group lacks access to financial advice
as it is not profitable for the industry to target them and they are unlikely to be served by
services aimed at the poorest and most vulnerable. New research carried out for the report
shows that many of them are failing to secure their future well-being. They are less likely than
higher earners to save, manage their credit effectively or to have key insurance products such
as life insurance or income protection cover.

And, as the Government takes forward its pensions reforms, (6) the research shows that they
are much less likely to be members of an available employer’s pensions scheme.

 Only around half the group are members of an available employer’s pension scheme
           compared to over 80 per cent of those on higher incomes (7).

The Foundation will now consult with the Government, the financial services industry and
consumer and voluntary groups about how to take its proposals forward and, in particular, how
a new service should be funded.

Clive Cowdery, Chairman of the Resolution Foundation, said: “This report shows that a
new financial advice service could give people on low incomes the advice they need in high
volumes and, depending on the service option chosen, at relatively low cost. We now want to
engage in a serious discussion about how to take these proposals forward and, critically, to
discuss how such a service should be funded.”
For further information, please contact:

Resolution Foundation
Patrick South, Director of External Affairs          Telephone: 020 7489 4489

Temple Bar Advisory
Alex Child-Villiers                                  Telephone: 07795 425580



Notes to editors:

(1) The report Closing the advice gap: Providing financial advice to people on low incomes is
available to download from www.resolutionfoundation.org

(2) The Treasury Select Committee are considering the issue of financial advice as part of
their inquiry into financial inclusion. For further information about the inquiry see:
www.parliament.uk/parliamentary_committees/treasury_committee/tcpn051115.cfm

(3) This is one of a range of costed proposals set out in the report for developing a new
national financial advice service. These proposals range from an Internet-based service,
which could be provided at an annual cost of £10-£15 million, to a national network of face-to-
face advisers, backed up by a telephone-based service, which could be delivered for an
annual cost of £90-£110 million. These proposals have been developed with the pro bono
support of the consultancy firm McKinsey & Company.

(4) Based on a telephone survey of 400 people on low incomes.

(5) Median income is currently £11,747 for individuals and £22,548 for households.

(6) See the Foundation’s response to the Pensions White Paper Advice is the missing
ingredient in pension reforms.

(7) Based on analysis of the British Household Panel Survey and the Financial Services
Authority’s baseline survey of financial capability.

(8) The Resolution Foundation’s trustees are Clive Cowdery, Tina Alexandrou, Baroness
Greengross, Guy Morton and Patrick Stephens. The Foundation has an Advisory Board which
also comprises David Carrington, Sir Howard Davies, Jeannie Drake, Laurie Edmans, Kate
Green, Brian Pomeroy and James Sassoon. The views expressed in the report do not
necessarily reflect those of individual trustees or board members.



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