David Prosser: Free financial advice is a top idea

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The Independent Online

While Gordon Brown was hogging the headlines with his attempts to defuse the Big Brother racism row this week, his number two at the Treasury was busy with a much more important project. In fact, Ed Balls' plan to launch a service that will offer free financial advice to any adult who wants it could turn out to be one of this Government's finest achievements.

We certainly need some help with our finances. It's not that people are stupid, but the climate in which we all save, invest, spend and borrow has become so hideously confused.

This week alone, for example, the Financial Services Authority, the chief City regulator, has warned that insurers have been misleading customers by claiming to offer savings on car and home policies that don't exist. Then we had the Government saying it might have to refund some people's voluntary National Insurance contributions. And there was a report from uSwitch claiming that banks made more than £600m last year from raising their overdraft charges.

There has been nothing unusual about the past seven days. Barely a week goes by without a raft of warnings about some problem or other. It all contributes to an environment in which it has become almost impossible to make even quite basic financial decisions without some sort of expert help.

Sadly, the small army of financial advisers plying their trade in this country - whether independent or employed by a company such as a bank - have failed to provide that help. Or at least they've failed to convince the majority of people they're up to the job.

It's a question of trust. Most advisers make their money by earning a commission from financial services companies when they guide clients towards buying their products. In that context, everyone who goes to see a financial adviser comes away with the nagging suspicion that they've been pushed towards the product that pays the largest commission. Or that they might not have needed a product at all, had the adviser not needed to earn a living.

A small but growing number of advisers charge a fee for their time, rather than taking a commission. But because the financial advice sector has never been able to convince us that it has the probity of, say, a profession such as solicitors, many people are reluctant to pay. And anyway the people who most need impartial, basic financial advice often can't afford to.

In this context, a Government-backed financial advice service is a brilliant idea - exactly what millions of people need.

There are some obvious worries. Will the quality of advice be good enough, for example? What happens if someone gets duff advice - would they be able to claim compensation?

But these issues can be resolved. What's really crucial is that we finally make independent financial advice freely available to everyone, and that it's advice people can trust. Forget Jade Goody and co - Balls' announcement should have been the biggest story of the week.

nnn Here's a piece of free financial advice from me that you really can trust. If you're covered by the self-assessment tax system and you haven't yet filed your tax return for the 2005-2006 financial year (which ended last 5 April), get it in before the end of the month to avoid a £100 fine.

As of 10 days ago, the most up-to-date figures available from HM Revenue & Customs, just half of the nine million people covered by self assessment had sent back their completed returns.

There's always a last-minute rush with self assesment, so the shortfall is to be expected, but last year almost 900,000 people missed the deadline and had to pay a fine. Don't throw your money away for no reason this year - fill in the form.

d.prosser@independent.co.uk

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