The Financial Conduct Authority (FCA) has announced a review of the financial advice market and asked for industry feedback on whether the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR) were successful.
RDR was meant to increase transparency in the industry and ensure clients received high quality advice, while FAMR was done to explore ways in which government, industry and regulators could take steps to deliver affordable and accessible financial advice and guidance to everyone.
In addition to RDR and FAMR, the current review will also look at what consumers want from the market and how the market works to deliver this. It will also consider how market trends and developments might affect the future development of advice and guidance services.
In the call for input, the FCA said it wants to assess whether client’s are getting value for money, and is asking for feedback on the importance placed by consumers on the cost of advice and guidance compared with other factors.
“The development of new business models can improve competition and drive down the cost of advice and guidance services,” the FCA said.
“Cost is, however, only one element in determining the value of a service. Other factors include elements such as the quality of the service, the level of support provided, and the range of additional features offered.”
Refocus
Steven Cameron, pensions director at Aegon, said: “Since the RDR and FAMR were implemented, the need for advice and the value it provides have continued to grow.
“The 2019 review offers a real opportunity, not just to assess effectiveness against the original aims of the reviews, but to reflect on recent changes and look ahead at how regulation can best meet the future needs of both consumers and advisers.
“We are keen for the FCA to refocus on closing the advice and guidance gap. Recent measures to protect individuals who don’t seek advice are helpful but enabling more people to get advice would be a better solution.”
Help and guidance
Tom McPhail, head of policy at Hargreaves Lansdown, said: “There’s plenty of evidence that access to the right guidance and reassurance can transform people’s confidence, their engagement and their attitudes to investing; ultimately it can make a significant positive impact on their financial futures,”
McPhail said. “The availability and the certainty around the quality of guidance hasn’t been adequately addressed yet.
“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.
“The nature of financial advice is also changing, with a trend away from the old model of a recurring relationship with regular fees, towards a more transactional approach, where people buy advice to address specific issues, as and when they need to.”
Details of feedback
The FCA is seeking initial feedback by 3 June 2019.
It will hold several stakeholders events, and collect further data through consumer research and surveying a sample of firms.
The financial watchdog intends to publish its final report in 2020.
Christopher Woolard, executive director of strategy and competition at the FCA, 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.
“We want the market to deliver a range of good quality, affordable advice and guidance services that meet consumer needs.”
