Cicero Policy Briefer

Issue 19, December 2007

National Strategy for Financial Capability—the challenges ahead

By Jonathan Chapman, Head of Financial Capability Department, FSA

The Financial Services Authority (FSA) has responsibility for leading the National Strategy for Financial Capability which aims to reach 10 million people over five years from 2006/07. The £90 million programme targets a range of key groups – school children, young adults who are Not in Education, Employment or Training (the so-called ‘NEETs’), students in universities and Further Education colleges, employees in their workplace, and new parents. In addition to the National Strategy, the FSA also delivers straightforward information through its Moneymadeclear consumer website and publications, and reaches a wide range of consumers via work with non-profit organisations.

I have been asked to write about the challenges facing the National Strategy for Financial Capability in the coming 12 months and particularly, those surrounding the need to measure outcomes. So, I'll start with the evaluation issue. Earlier this year, the FSA and the National Strategy for Financial Capability were audited by the National Audit Office and their report stated that we have:

• set impressive targets in seven areas (our aim is to reach consumers when they are most receptive to information about personal finance, so via schools, universities and youth intermediaries, when expecting a baby, at work and using truly consumer-focused online tools and publications);
• highlighted the issue of low financial capability in the UK;
• played a major role in placing financial capability on the agenda of the government and the financial services industry;
• provided vital coordination and direction to deliver real outcomes for consumers; and
• developed positive relationships with financial capability partners.

A resounding endorsement of our programme so far. However, the NAO also recognised that measuring outcomes of financial capability work is inherently difficult.

We began work with, and took our direction from the results of, the UK's first financial capability survey and we plan to repeat this every four to five years. This will show, at the highest level, improvements in the nation's financial capability. Or, as we've defined it, the ability to make ends meet, keep track of finances, plan ahead, make informed decisions and keep up to date with financial matters. Looking closer at our individual initiatives within the strategy, we have developed evaluation programmes for each one. These involve both measuring the initial reactions of individuals involved and the follow-up work to gauge longer term, real impacts on their lives.

A real challenge for us in the year ahead will be to find ways to increase the rigour of that project specific evaluation further but also to measure the combined impact of the various strands of the strategy. We plan to create measures that will cut across the strategy to help us measure that combined impact and, where possible, the impact of the work of others in the same field, as well as whether, together, these are all helping us achieve our objectives.

Another challenge I must mention is of course, is our need to respond to the imminent decisions of the Thoresen Review of Generic Financial Advice Provision. The FSA has been working closely with Otto Thoresen and his team throughout the review and we are confident that any proposals for the shape and form of a generic advice service will be compatible with the work of the National Strategy.

Of course, the provision of such a service will present significant strategic and operational challenges for the body appointed to run it, whatever form it takes. There are, for example, challenges around providing as much help as possible without straying into 'regulated' territory; reaching and engaging consumers effectively; ensuring that the advice given is consistently of high quality; mobilising the range of existing advice providers, and so on. These are considerable challenges, but they are ones that we know only too well at the FSA. We already face them in delivering our existing financial capability projects.

Jonathan Chapman is the Head of the Financial Capability Department at the FSA and can be contacted here.

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