How much debt advice do you give your clients?

The last 2 'new' clients I've seen, both this week, appeared to have large mortgages, and a little spare monthly 'cashflow'.

Was I right in advising them to contact their lenders and set-up overpayment arrangements to reduce their loans more quickly? It made me feel good, them too, but it doesn't pay my bills. I guess I should send them an invoice, Michelle...

Obviously financial advice encompasses debt repayment. Why invest £50 per month when you have a credit card at £1,000 and charging 18% APR. However, we are not debt counsellors who want to take on clients who purely need debt counselling. As someone has previously stated we are not charities and we have bills to pay.

The education about finance should start in the schools how to manage on a limited budget, the real cost of living. With students leaving university with potentially £40K of debt in the future rising with inflation to about £68K of debt over the next 20 years where do you start.

Let us turn back the clock and go back to some basics and if that means taking 50p a week into primary school to be saved then so be it. It is the savings culture which needs to be turned on and that starts with piggy banks, savings stamps etc etc.

In addition the government should be doing more to reign in credit. It is far too easy to obtain and it is thrown at people who do not necessarily know how to handle it.

Stop asking advisors to pick up the tab for something which is not ultimately our responsbility only part of it as a general practioner.

One thing I realised recently is that IFAs need a consumer credit license to give advice on debt. Mortgage intermediaries will already have one (or should!) but those who don't mediate morgages shouldn't counsel clients on debt without a CCL apparently.

Colin is right. Once the new Debt Management guidance is fully drafted after consultation, IFAs will need a debt counselling CCL to advise and refer clients. There are likely to be stringent sanctions for those who don't take these precautions, as introducers are a growing concern to the debt advice profession.

However, there are plenty of excellent and free guidance resources that you may share easily and Zero-credit is very much of the opinion that it is best practice to do so. We shall be publishing Digital Presence for Debt Advisers amongst our subscribers' resources soon, although for the less involved in debt management a simple link to http://adviceguide.org.uk shows empathy with the current climate, no? Likewise the OFT has some excellent pdfs that are easy to place on a website, or print off.

Considering that nationally we are in personal debt to the tune of £1450 or so billion, the potential for non-repayment is a catastrophic outcome for all of us. We have to consider prevention and not merely acting when people become overindebted.

It is inherently naive to assume that someone who is indebted now is simply "low net worth". When all of us are accommodating significant changes in circumstances, would you like a client you have helped to return to your practice or not? To enjoy recovery, you need to invest in it.

Presumably paying fees at £150- £200 per hour for advice will increase their debts even further?

Clients may face further fees for exposing their protection wekanesses (Phi, CIC LTA, DTA) resulting in possible higher outgoings and more debt for them too. Presumably the regulators do not wish cross subsidization of commission from product selling to keep things unbiased and not resulting in arranging a product!

Are clients who have large or mounting debts and reducing income or unencumbered assets really the type of clients fee paying advisers need either pre RDR or post RDR 2013 going forward?

One off fee business may be as a fee, but a valued long term retainer fee would seem totally inappropriate. Clients may also be forced to speculate as to why he needs to pay more fees for a pure financial planning review to tell him he or has not enough protection (PHI, CIC, life cover top up), and therefore you need to pay out more in some cases. This should not contaminate or dilute those clients who simply need to reduce debt. Fees for complex finanical advice need to be paid for.

More client segmentation categories needed:

Gold Silver Bronze Tin 'You shouldn't be using us really, you can't afford to -consider free charitable advisers or free govt debt reduction agencies but be mindful of the loan sharks waiting at the end of the drive' category.

Against this, some clients may need to be told to reduce debt for self preservation -perhap government decision trees will give them the free fee paying ride to meet their requirements - lets hope the govt decision tree people have consumer credit licences too (money made clear or not as the case may be).

Big Society/big debt problems call for?....1. money to magiced out of thin air (we've had this for the last 15-20 yrs), 2. reshuffled debt or 3. actually create some wealth to repay debt - only on one of these can we say the UK is incapable of delivering - the latter.

Guidance on debt is pretty easy and Michelle you're right in my opinion - pay it off before saving. The exception being to save for a cash reserve and save for retirement especially if there's a sponsored sheme available.

Debt counselling is something entirely different and does require appropriate approval via CCL. We have this but not the function for debt counselling so cannot advise, therefore its simple.

The problem with hese headline political announcements is that all too often the politicos (and journalists) just don't understand the issues at hand.

Why don't the politicians just sort out all the mess and do it very quickly? The reason of course is because it's not very easy and has to be paid for - that's the point!!

The extent of my debt counselling (broadly speaking) is either to pay off your mortgage and/or credit card debts (rather than invest a lump sum) or, for those who are just plain in debt and struggling to keep their heads above water, Here's the number of the Bristol Debt Advice Centre.

Monthly savings are probably okay if there's a sizeable positive difference between income and outgoings. Monthly premiums for Mortgage Protection life insurance, though, are a top priority.

THere's a simpler way to look to look at some of this - just look closely at some of the adverts on television.

With a BBR of only 0.5%, who is actually getting that rate. vIrtually all mortgages are at much higher rates and so-called "payday loans" are close to 4,000%

Maybe I'm being bit thick and perhaps I am lust a bit simple, but how can ANY lender justify such excessively extortionate rates.

And more importantly, if any lenders feel that they can justify such extortion 9and it IS extortion, in my opinion), how can any government regulator allow it???

Instead (yet again) the IFA is expected topick up the pieces and give proper and professional advice to help the consumers avoid such crooked and unfair schemes, just lioke we re supposed to be ble to spot and report so-called Ponzi schemes and ML with the associated financial fraud.

Crooked and unfair??? YES!!!

And in my opinion there is no place for financial bullies like these, particularly when we are supposed to be in the midst of a financial crisis, where savers are struggling to find savings accounts that pay a little more than BBR (before tax) yet charge over 4,000%

So why is thwere no support for the great iFA's - and in my opinion the vast majority of iFA's out there are trying very hard to benefit the consumer, despite the clear faults in the regulatory system

But the bottom line surely must be that extortionate lending rates are clearely wrong and unsustainable when in the midst of a financial crisis.

Napoleon the pig from Animal Farm must be sitting back very pleased with himself!!!

However, in my opinion, the complete numpties who believe that they are in charge of the Government and so-called regulation of the Finance Industry should be hanging their heads in shame.

Or am I just a cynic???

And if I am indeed just a cynic, am I the only one???

You're by no means the only cynic Dave, but your typing and spelling are terrible.

I agree with all the above comments. The only thing I think may be incorrect is that 1st charge domestic mortgages do not need a CCL, one is needed for B2L, second charge, loans etc.

Always consider reducing high interest debt before investing it's simple common sense and lastly

we are NOT Debt advisers. If as some IFAs do, an IFA looks to give debt advice, bearing in mind the client invariable HAS DEWBT problems, then charging them our fee levels will NOT help so the best way to do it for BOTH parties is through citizen's advice and not thru an IFA firm so that we are not held personally liable for something we haven't been paid for! It's one thing to give your time to try and help, but madness putting your business and own well being at risk of someone who then tries and make a claim against YOU!

Julian:

Thanks for your comments. Sorry about the typing, but that isbeing caused by a slight, but growing paralysis that I have no real control over, so please bear with me for a while on that score.

At least I know that I am not quite the only cynic!!!

But does it take a cynic to appreciate right from wrong?

0.5% before tax for savers yet over4,000% APR after tax for borrowers???

Treating customers fairly? Right or wrong???

WRONG!!! (In my cynical opinion?)