In his speech at Bloomberg’s offices this week, Wheatley conceded to the unhealthy “see-saw nature” of the relationship between the advice industry and regulators over the years, with “question marks” over how firms provide support or advice to customers without bumping up against the regulatory rulebook.
He said: “A key question in this debate is, where are the frontiers between execution-only on the one hand, full advice on the other? Is there more room for firms to offer investment advice that’s limited or focussed to a specific consumer problem?”
The problem is that we’ve heard all of this before, and while the execution-only sector has made great strides forward in recent years – at least in terms of availability and profitability – the regulator’s problem remains. The fact is that there are many who either don’t want to pay for advice.
I’ll leave it to others to sensationalise about the “disenfranchised millions” or “advice gap” that may exist – I think this debate can be misleading – but as the regulator embarks on a series of roundtables with industry and consumer groups alike, there’s a feeling that we’ve been here before.
Remember the FSA’s Basic Advice initiative, eventually scrapped in 2008? Or the Primary Advice rules established in an early draft of RDR, aimed at providing more straightforward help on simple products and once suggested as a solution to falling IFA numbers?
Wheatley calls for more innovation, and with Albermarle Street Partners and Chelsea Financial Services gearing up for the summer launch of ratings venture FundsCalibre, investors will have access to another way of choosing between funds which they can access themselves through execution-only.
Still, there’s no free advice in terms of asset allocation or long-term planning. These things, rightly, remain the domain of wealth managers and financial planners.
However, Chris Williams CEO of WealthHorizon, says that in its current form the advice industry remains too rigid, designed “to fit advisers’ business models, rather than serving the needs of the consumer.”
“The industry is promoting an all or nothing approach which doesn’t give clients choice, they face the prospect of either having to pay for full advice or having to do it themselves,” he adds.
“This is polarising the advice process and does not benefit anyone. Clients’ needs are often very simple and these need to be met first, with additional augmented advice delivered as and when needed. The industry, with the support of the FCA, needs to start exploring the middle ground and finding a solid platform on which it can build.”
In truth, the regulator needs to be clearer one way or another on what, if any, its concerns are about execution-only and push this forward. Then, once we have clear definitions about what is advice and what is doing it yourself, we can move on to ensuring the ‘middle ground’ is not a no-man’s land.
