The Financial Conduct Authority (FCA) has set out the basis for its joint review of the advice guidance boundary with the Treasury.
The starting point builds on feedback from industry and consumer groups and this information will help shape and govern the joint review which was announced as part of the Edinburgh Reforms.
The review aims to ensure that consumers get the help they want, at the time they need it, and at a cost that is affordable, to help them make informed financial decisions.
The FCA said that following key themes and insights have emerged from its early phase of this work, informed by engagement with industry and consumer groups, and which will guide the next phase of the review:
- The solution to this challenge will not be met by changes to regulated advice alone. People’s needs are diverse and vary over their lifetime. We need firms to actively engage and provide flexible forms of support that can adapt to different types of financial decisions.
- To provide more support to more people it will be necessary for firms and consumers to manage risk, rather than eliminate it. This is because risk is a key driver of cost to firms and ultimately to consumers which directly impacts on the availability of support.
- Any solution will rely on support being provided on a commercial basis. The review will need to focus on outcomes and design a regulatory system where commercially viable models of support can emerge.
- This review should leverage the Consumer Duty, to set clear expectations for the support that firms provide their customers and ensure that consumer protection remains at the core of any future regime, and it will work closely with the Financial Ombudsman Service to do so.
Core advice
While the review is ongoing, the FCA said it is incorporating the core investment advice regime into the advice/guidance boundary review.
The FCA said: “Whilst not wanting to restrict consumers’ ability to invest, we want them to be able to access and identify investments that suit their circumstances and attitude to risk.
“Key to this is ensuring that consumers can get the advice or support they need, only access higher risk investments knowingly, and are protected from scams.
“Given the potential for more significant change that is now possible through the advice guidance boundary review and given the limited support from industry for the initial set of proposals consulted on, we have decided to roll the development of these proposals, taking onboard the feedback we received, into the broader review.
“This will allow us to support the more substantial changes that are being asked for and considered through the review. The consistent feedback from the consultation was that firms wanted the proposals to go further in terms of examining the boundary between advice and guidance – in rolling this work into the boundary review we will be able to consider and develop proposals for more significant reform.”
The consultation feedback will help inform future developments, with the aim of developing broader and commercially viable propositions to broaden access to financial advice. The FCA said it will provide a further update in a policy paper that will be published in the autumn.
‘Vital’
Sarah Pritchard, executive director for markets at the FCA, said: “It is vital that people get the help they need to make effective decisions – whether that be guidance or full financial advice from a qualified financial adviser. This is particularly so now, with the cost-of-living pressures. We want consumers to have greater confidence to invest, but to achieve that people need access to the right information to help them make decisions, understanding levels of risk.
“Our joint work with the treasury in the months ahead will help to achieve that. In the meantime, and to see quicker improvements, we are taking steps now to give firms greater confidence to support consumers, pending broader reform, by clarifying the boundary of the current regime.”
Chris Hill, chief executive of Hargreaves Lansdown and FCA practitioner panel member, added: “Data and digital tools mean there is now a lot more we can do to nudge consumers to better investing behaviours. The clarity the FCA are bringing today on the advice boundary, and the commitment to review this, show that we can develop a new regime to ensure firms can do more to drive better consumer outcomes.”
