The Financial Conduct Authority (FCA) has launched a review of the financial advice market asking for industry feedback on two of its landmark pieces of regulation, which commentators hope will improve the quality of guidance and close the advice gap.
On Wednesday the regulator published a ‘Call for Input’ looking at whether the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR) have been successful.
The review will also ask consumers what they want from the market and how this is delivered, as well as how market trends and developments might affect the future of advice and guidance.
The regulator is asking for feedback from consumers and representative bodies, retail financial services firms and professional associations and trade bodies, as well as businesses which support these companies such as consultants and IT firms.
RDR was launched in 2006 to improve cost transparency and increased the professionalism of advisers, but most of its rules came into effect in 2012. FAMR was launched jointly with HM Treasury in 2015 to identify how to make the UK’s financial advice market work better for consumers.
FCA executive director of strategy and competition Christopher Woolard said: “Millions of people look for help and support in making financial decisions every year and the aim of the RDR and FAMR was to help the market develop the right advice or guidance services consumers need to make those decisions.
“Consumers and the market are changing rapidly, as technology, employment patterns and inter-generational challenges change the way consumers interact with financial services. As well as looking at how the market has evolved since RDR and FAMR, it’s important that our work looks ahead to see how we ensure that this important sector works well in the future.”
A chance to address the advice conundrum
Hargreaves Lansdown head of policy Tom McPhail said there’s plenty of evidence that access to the right guidance and reassurance can transform people’s attitudes to investing but the availability and the certainty around the quality of guidance hasn’t been adequately addressed yet.
He said: “Too often firms are still wary of crossing the boundary into inadvertently giving advice and as a result they stop short of giving the guidance their customers seek. The review announced today looks well placed to gather evidence on how to build on the success of existing reforms, and extend consumer access to advice and guidance while maintaining high levels of consumer protection.”
Aegon said it is keen for the FCA to use the review to refocus on closing the advice and guidance gap.
Pensions director Steven Cameron said: “While Aegon research shows advisers continue to support FAMR principles, there has been disappointingly little practical change, and no real sign of the advice gap reducing. Recently, the FCA has been focused on developing protections for non-advised customers, including those exercising pension freedoms. While helpful, we believe the emphasis now needs to return to facilitating more people receiving advice.”
The call for input closes on 3 June before a period of research and stakeholder engagement. The FCA will publish its findings in autumn 2020.
