Six months after opening, the Money Advice Service is to undergo swingeing cuts to staff and a dramatic overhaul of the way in which it delivers free financial advice to consumers.
The service provides personalised face-to-face, telephone or online advice on issues such as debt reduction, life insurance, savings and pension provision.
Mark Hoban, financial secretary to the Treasury, announced at its launch that the service, which is funded by a levy on the financial services industry, would “help people take the right decisions”.
But in spite of providing more than 250,000 families with a comprehensive financial “health check”, the service appears to be disappointed with the extent of its reach.
Individuals close to the service said head office staff levels could be cut from over 150 to around 20. A spokesperson said the scale of redundancies could not be confirmed but said frontline advice would not be affected.
The Money Advice Service was established in the wake of a report by Otto Thoresen, now director-general of the Association of British Insurers, which claimed that free, nationwide basic financial advice could help prevent consumers falling into debt and reduce mis-selling complaints.
This year has been characterised by the messy fallout of consumer mis-selling scandals, including the £7bn bill faced by banks to reimburse customers wrongly sold payment protection insurance.
Campaigners say the introduction of a national pensions savings scheme in 2012 will increase the need for unbiased guidance, as will the Financial Services Authority’s move to ban financial advisers from taking commission from 2013, which is expected to create an advice gap for consumers who cannot afford to pay for advice.
Research from the FSA this year found that most consumers still do not understand basic financial terms. Campaigners say they are particularly concerned that banks in search of revenue streams are targeting retail consumers with complex investment products.