Part of Financial Services and Markets Bill – in the House of Commons at 3:30 pm on 7th December 2022.
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 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.