The FCA have launched what they call “a major new review looking at how financial advice could work better for consumers”.
A quick scan of the Terms of Reference of this Financial Advice Market Review suggests it is as ambitious in its scope as the Retail Distribution Review that preceded it.
The review will examine
- the advice gap for those people who want to work hard, do the right thing and get on in life but do not have significant wealth;
- the regulatory or other barriers firms may face in giving advice and how to overcome them;
- how to give firms the regulatory clarity and create the right environment for them to innovate and grow;
- the opportunities and challenges presented by new and emerging technologies to provide cost effective, efficient and user friendly advice services; and
- how to encourage a healthy demand side for financial advice, including addressing barriers which put consumers off seeking advice.
Many of these questions have pre-occupied my blog for the last five years and it is great that the Government are now addressing them holistically in what appears a sensible way.
In its scope the review will ….
seek evidence from consumers about the barriers they face in seeking advice; the value they place on it and how easy it is to understand where advice can be found and what it means.
While focusing on consumer financial services and products, the review will also look at the provision and effectiveness of advice across retail markets to assess whether differences in regulatory requirements around advice lead to unintended consequences for consumers and firms.
It is also possible that a number of the review’s recommendations could have applicability in other financial services markets.
The timeframes of the review are tight, it will be completed by the end of the year and will be published in time for next March’s budget.
Amongst the many outputs it will create , I’ve picked out four
- empower and equip all UK consumers to make effective decisions about their finances
- facilitate the establishment of a broad based market for the provision of financial advice to all consumers
- create an a regulatory environment which give firms the clarity they need to compete and innovate to fill the advice gap
- an examination of the role that might be played by regulatory carve-outs such as a so called safe-harbour
With particular reference to that last bullet, it’s particularly important that the Review will
also consider the interplay between the regulatory framework for advice and the role of the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS) in redress
APFA have picked up on this particular aspect of the Review, but while the Review looks set to provide “long-stop” protection on advice, it will undoubtedly ruffle feathers too,
The Pension PlayPen’s really pleased this review is happening now, in advance of the advisory crunch on auto-enrolment and in time to avert the looming crisis on pension transfers that is threatening to derail the pension freedoms project.
This looks like the FCA learning to fly!