Firms sceptical over financial advice plan

The financial services industry gave a lukewarm reception to the Government's proposals to develop a new generic financial advice service yesterday, expressing scepticism over its plans to force insurers and banks to help fund the scheme.

The Government plans to spend £12m rolling out a pilot version of a basic financial service – available over the phone and on the internet as well as face to face – with a view to establishing a permanent scheme within the next few years, the cost of which would be footed equally between the Treasury and financial services industry.

However, several of the larger insurers remain concerned that the benefits of such a scheme to their business will be marginal, arguing that the Government should pick up more of the costs.

Matthew Connell, the head of government and industry affairs at Zurich, said: "Money guidance is a vast area, and the consumers who are in most need and most vulnerable are the ones who will rely most on state benefits. So it makes sense for the scheme to have a higher proportion of funding from the Government.

"Furthermore, the need of the most vulnerable consumers is often around debt and budgeting ... so we think lenders should be first in line [to pay] for that."

Mr Connell conceded that the life industry would benefit from a better financially educated population, but said the insurers should only be left on the hook for a small amount of the cost.

A spokesman for the Association of British Insurers said he believed that the Government's personal accounts scheme should also foot some of the bill for generic advice.

The new scheme is the brainchild of Aegon UK's chief executive, Otto Thoresen, whose Government-commissioned report into the creation of a generic advice service was published yesterday.

The Financial Services Authority will run the generic advice pilot.