On the 13 June, BEUC, OEE and Better Finance organised a seminar on Financial Guidance, presenting the study and a position paper carried out by the Financial Services Users Group on the topic.
As financial products and financial decisions have become more and more complex, consumers and families need access to quality information and above all, quality, affordable and independent financial guidance to help them make key financial decisions such as taking out a mortgage, choosing a pension plan or simply managing their finances better.
But things are not so simple. There is no clear or common decision on what financial guidance is at the European level and the various services available in the Member States do not necessarily meet the criteria. For instance, financial advisors may not be fully independent and can simply be salespeople for various financial service providers.
The definition retained in the FSUG paper and study is the following: “Financial guidance is a process of determining an individual’s financial goals, purposes in life and life’s priorities, and after considering his resources, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals.” This means that financial guidance does not consist in proposing a specific financial product from a financial service provider but to “guide” a consumer towards certain product types or helping him/her define financial goals not necessarily linked to financial products (for instance, savings habits, spending etc).
Despite the benefits of such services, there are many challenges which need to be addressed. Financial guidance is still considered to be too expensive for most consumers. While consumers are willing to pay for other forms of guidance such as legal guidance, or medical guidance, they are unwilling to pay for financial guidance even though a bad financial decision could cost them a lot of money. In the countries covered by the study, various funding schemes exist among which government subsidies or direct levies on the financial service providers.
While there is no easy blueprint for what could be recommended or appropriate for all Member States, there are some general recommendations that can be made with regards to Financial Guidance:
– Ideally, these services should be free for consumers.
– Financial Guidance should encompass a broad range of financial decisions and not limit itself to debt advice, investment advice or other specialized forms of advice.
– A Financial Guidance programme must build on the existing organizations, notably consumer organizations, which fulfil certain requirements such as independence.
– A national body should be set up to encourage the development of such services and provide oversight.
– A certain number of issues need to be resolved such as the fact that skills, training and accreditation which are greatly divergent as they are not harmonized, uneven regulation of Financial Guidance, liability issues, clear separation between salespeople from financial service providers and Financial Guidance providers, little quality control and lack of clarity in mechanisms for redress.
The European Union, in this regard, does have a role to play. MiFID II has already helped in providing consumers with better information about financial products, but there is scope for more. Fostering the development of quality, independent and affordable Financial Guidance should be a priority and a logical next step after the focus on the provision of clear and understandable information to consumers.
COFACE Families Europe is part of the FSUG and will continue advising the European Commission on necessary next steps and follow up on the important issue of Financial Guidance.