Harriett Baldwin proposes an amendment to the Financial Services and Markets Bill that would ensure everyone has access to personalised financial guidance from appropriately regulated financial services firms.
Thank you, Madam Deputy Speaker. I will try not to gabble.
I rise to speak to new clause 11, which stands in my name and in the name of many right hon. and hon. Members; I am pleased to hear from the hon. Member for Hampstead and Kilburn (Tulip Siddiq) that the Opposition support it too. I should clarify that I am speaking in this debate as an individual Back Bencher, rather than as Chair of the Treasury Committee.
As the Economic Secretary has highlighted, one of the many benefits of being able to bring financial regulation back into the UK is that we can create rules that will help to unleash growth and investment here. My new clause highlights the opportunity that reviewing MiFID presents for us to look again at the boundary between regulated advice and guidance.
I am proposing personalised guidance on financial matters. As we all know, the implementation of the retail distribution review about a decade ago has meant that financial advice is now a very high-quality service that is very expensive. The vast majority of our constituents do not pay and are not willing to pay for it. Something like 8% of people—I confess that I am one of them—are lucky enough to afford a financial adviser, but 92% of our constituents do not have that luxury.
When I was Economic Secretary in 2015, I launched the financial advice market review, which came up with 28 recommendations to help our constituents. Many wise steps were taken at the time, including enabling people to use £500 from their pension savings to pay for financial advice when using their pension freedoms. Despite those measures, however, there is still an enormous gap for our constituents. For example, about 10 million people in this country are fortunate enough to have more than £10,000 in savings, but 58% of that money is just sitting there in cash, and we all know how inflation is eroding the value of those investments.
My new clause 11 approaches the problem from the other direction. I was pleased to hear the Economic Secretary commit at the Dispatch Box today to using the new flexibilities and seeing whether he can do something like a personalised guidance review with great urgency. That will help our constituents in the following generic examples.
A customer may be saving for a deposit for their first home, but doing so with a cash individual savings account. They could get a nudge from their financial institution to consider putting the money into a lifetime ISA so that they get the Government rebate.
A customer may be sitting on a large cash balance for many months, well above their normal three-month outgoings. They could get an alert to warn them about the detriment to the value of cash as a result of inflation and to narrow down some suggestions for getting a better deal for their cash. With many of our constituents, particularly our elderly constituents, there is a lot of inertia because they are not receiving very much on their deposits. This approach would give them a nudge that there are better rates out there that they could be receiving.
A customer might have invested in a fund on a platform many years ago and have done nothing with it since. If the fund is poorly performing, they could get a nudge with some personalised guidance. A customer who opened a junior ISA, which by definition would have a very long time horizon, might get a nudge that cash was not the ideal investment, and that in his or her circumstances an investment with a longer time horizon might provide better protection from inflation.
I agree with the case that the hon. Lady is making—indeed, I have signed her new clause. I wonder whether she has seen the report produced by the Work and Pensions Committee in September, which expressed concern about stepping across the advice-guidance boundary and constraining the ability of pension schemes and employers to give people helpful, sensible support as they make their choices about what to do with their pension savings. Would her new clause help in that regard?
I thank the right hon. Gentleman for signing the new clause, and for his Committee’s excellent report. He is right to suggest that the workplace is one of the best places for people to be given these nudges, and for employers to explore that boundary between advice and guidance.
Our constituents are craving advice of this kind, especially during this cost of living crisis. They want more guidance from their financial institutions. They are turning to online sources of often unregulated information to help them navigate their finances. They are finding the process complex and confusing. They are choosing investments that are often very high risk and not suited to them at all, such as meme stocks, crypto or spread betting.
It should not need to be this way, because the technology exists for financial services and fintech firms to guide people towards making better financial choices and following good mainstream investment opportunities, but MiFID-originated legislation is getting in the way. My new clause would enable the Treasury to introduce, with great urgency, the necessary legislation to allow regulated financial services firms to offer UK households personalised guidance. It is a great opportunity to unlock investment in our country, it will help our constituents to earn more, and it will allow innovation. Financial technology will help our constituents to level up their own economic futures. I am therefore delighted that the Economic Secretary has agreed today to look into this as a matter of urgency.
I fully support the proposed measure. Let me say something that is specifically for the ears of my hon. Friend and those on the Treasury Bench. Just is a company in Reigate, formed from a company called Just Retirement and Partnership, which provided products that challenged the existing ones, involving, for instance, equity release and life insurance for smokers. As a provider of challenger products, it was anxious for people to have access to independent advice, rather than just being directed only to its own products.
Let me end by saying that personalised guidance would offer the Economic Secretary the chance to make his mark and help all our constituents to benefit from better financial information. I am very pleased that he has committed himself today to look into it with the utmost urgency.
The Minister is making some encouraging sounds about new clause 11. In addition to the commitments that he has just made, will he instruct officials to look at the matter with the greatest urgency?
I am happy to confirm that we will pursue it with great urgency, as the Government should be doing with everything in this important domain. Although the Government will not be supporting new clause 11 today, it goes some way to address the issue, so I will look at it as a basis for potentially moving forward. The Bill enables us to do that, so we do not have to do it today. I commend the other amendments tabled in relation to preventing consumer harm.