B4 - Information guidance and advice

What is the function + role and responsibilities of Citizens advice? 

Function:

• An organisation that offers free and impartial advice to individuals on legal, financial, consumer and other problems.

• Run by charities

• Offers a large amount of generic advice through the website plus individual advice face to face, email or phone

• Mission statement

• Not legally binding

Role and responsibilities:

• To provide advice to members of the public

• To improve the policies and practices that affect lives

• To promote equality and challenge discrimination

What are the advantages and disadvantages of citizens advice? 

Advantages

• Free and impartial

• Widely available/accessible - face to face, telephone and online

• Extensive coverage including benefits, debt, work, housing, law and immigration

Disadvantages 

• Run by volunteers who may not be experts in the field

• A charity and therefore funded by donations, so services may be limited as a result of the funds available 

• Potential for Bias - information may not always be up to date or completely unbiased. Can lead to clients receiving generic advice that might not fully address their specific situations

• May be long wait times for assistance - especially with in person consultations

What is the function + role and responsibility of Independent Financial Advisors (IFA)?

Function

• Professionals who offer advice on a wide range of financial services e.g. mortgages, pensions and savings

• Can advise on products from a wide range of providers i.e. they are not tied to one financial provider

• The IFA charge fees for their services

Role and responsibilities

• To offer professional and unbiased advice to clients on how best to manage their finances e.g. the best mortgage or saving scheme

• To keep up to date with any changes in the sector and the services offered by third parties e.g. banks and pension companies

What are the advantages and disadvantages of an Independent financial advisor (IFA)?

Advantages

• Can advise on products from a wide range of providers i.e. they are not tied to one financial provider - unbiased advice 

• Individuals may have a personal IFA who they work with over a long period of time trusting them with many aspects of their personal finance management

• They can get you better deals that you can’t get on your own because of commission 

• Extensive training and experience - beneficial when navigating complex financial situations

Disadvantages

• Charge for their services

• Have been examples of mis-selling e.g. offering the wrong advice in order to benefit themselves from commissions received

What are the function + role and responsibilities of price comparison websites?

Function

• To provide free information on the internet allowing users to compare prices from a range of organisations offering the same or similar products

• e.g. car insurance, currency exchange, mortgages

Role and responsibilities

• To collect and share up to date information

• Provide search options for customers allowing them to easily compare prices from similar providers of a service

What are the advantages and disadvantages of Price comparison websites

Advantages

• Free, impartial and easy to use

• Convenient as available online 24/7

• Users can save money by finding the lowest prices available from various providers

• Convenience - process is quick & easy, allowing users to compare prices without the need to visit multiple websites, time efficient

• They provide detailed product info, customer reviews and ratings, allowing customers to make informed decisions based on various factors beyond price alone

Disadvantages

• Do not always include all providers - consumers may miss out on better prices or better coverage options that are only available directly from certain providers, consumers assume they are getting the best deal when they may not be

• May not be fully accurate or up to date

• Hidden costs - the cheapest options displayed may not include all necessary fees or may offer basic coverage that doesn’t meet the user’s needs, making consumers pay more than expected once additional costs are factored in 

• Some comparison sites may prioritise listings based on sponsorship or advertising fees, leading to biased results - misleads consumers into thinking they are seeing the best options when they are being shown products that pay the site more 

What are the function + role and responsibilities of Debt counsellors?

Function

• An individual e.g. an IFA or organisation who works to help advise individuals on how to avoid and manage debt

Role and responsibilities

• To offer advice on how to reduce payments or overcome debt problems

• Can also offer help with IVAs and bankruptcy

• Can be charitable organisations helping to reduce debt

What are the advantages and disadvantages of Debt counsellors?

Advantages

• Advice is from a debt management specialist

• The FCA and FOS regulate counsellors

• Debt counsellors can help negotiate lower interest rates and create manageable payment plans, making it easier to pay off debts 

• Entering debt counselling can offer legal protection from creditors, preventing harassment and potential legal actions

• Can lead to improved credit scores over time as learn to make timely payments

Disadvantages

• Range of advice may be limited

• Charge for their services - can add to the financial burden if not managed properly 

• While under debt counselling, clients may be prohibited from taking on new debt which can limit financial flexibility

What are the function + role and responsibility of Individual Voluntary Arrangements (IVAs)?

Function 

• A government organisation that allows individuals to work with an insolvency partner to manage their debt

The individual:

• Declares themselves bankrupt 

• Agrees to make a regular repayment of a pre agreed amount to an insolvency partner

• The insolvency partner shares this out amongst all of the individuals creditors

• All or some of the debt will be repaid 

Role and responsibilities 

• Helps individuals to manage debt by providing a solution whereby an agreed amount is paid on a regular basis with the insolvency partner allocating this between creditors

What are the advantages and disadvantages of Individual Voluntary Arrangements (IVAs)? 

Advantages

• Support individuals with debt problems

• Offers a manageable solution

• At the end of the IVA term, typically 5 years, any remaining unsecured debts included in the arrangement are written off

• Legal protection from creditors - once an IVA is in place, creditors are legally bound to stop pursuing you for debts, means no more calls, letter or legal actions against you 

Disadvantages 

• Affects ability to gain credit in the future

• Charges are incurred 

• Your name and address will be listed in the insolvency register, making it publicly known that you are in an IVA

• Entering an IVA will significantly impact your credit score for the duration of the agreement

What is the function + role and responsibilities of Bankruptcy?

Function

• When an individual formally declares themselves as unable to repay their debts

• Should be seen as a last resort as the consequences can be severe and long lasting

• E.g. can only have a basic current account if bankrupt + stigma and bad credit rating

Role and responsibilities

• To offer advice on how to reduce payments or overcome debt problems

• Can also offer help with IVAs and bankruptcy

What are the advantages and disadvantages of Bankruptcy?

Advantages

• May reduce the stress imposed by severe debt problems

• Many unsecured debts such as credit card debt and medical bills can be discharged - no longer legally required to pay them

Disadvantages

• Should be seen as a last resort as the consequences can be severe and long lasting e.g. stigma and bad credit rating

• Filing for bankruptcy can severely impact credit scores making it difficult to obtain loans or credit in the future - bankruptcy can remain on a credit report for up to 10 years

• While some assets may be protected, others may be liquidated to pay off creditors which can include valuable property