The Financial Conduct Authority (FCA) alongside the government have introduced three proposals to provide more people with access to advice and support about their money.
They are seeking views as part of the joint Advice Guidance Boundary Review on the proposals to help people make more informed investment and pension decisions.
The three proposals include:
• Further clarifying when firms can give consumers support without giving regulated financial advice.
• An innovative new approach allowing firms to provide support tailored to groups of people in similar circumstances.
• A new form of simplified advice that makes it easier for firms to provide affordable personal recommendations to clients with more straightforward needs and smaller sums to invest.
Bim Afolami economic secretary to the treasury, said: “ The gap between holistic financial advice that is unaffordable for many, and guidance that is free to access but not personal to the consumer, is simply too vast.
“This so-called ‘advice gap’ is excluding people with modest investments, who are looking for support that doesn’t break the bank.
“This just isn’t good enough – we have long needed a middle ground that is affordable and accessible. The policy paper that the government and the FCA have published today will explore how we can achieve exactly that.”
Progressive Change
Ben Hampton, chief executive of Wealth Wizards (part of the Royal London Group), feels this is different to previous attempts to solve the puzzle of the advice gap calling the pace of change ‘progressive’.
He said: “This is the start of new era of how people make financial decisions. We will need to digest the detail however the ability to be more personalised and opinionated outside of regulated financial advice will reshape customer behaviour. The real winners are going to be those who can coherently connect the new and different types of support that will become available.”
Positive Industry Support
Alastair Black, head of savings policy at abrdn, said the firm were pleased to see the government and regulator addressing both sides of the advice gap.
Black stated that the firm will support its adviser business partners in developing the proposals and maximising their chance of success.
He said: “We were also pleased to see the Government mention the need for the simplified advice regime to avoid having to take into account consumer’s wider financial circumstances (allowing the advice to be targeted). If effective, this will maximise the chance of advice firms keeping costs for their clients down and growing capacity which benefits all.”
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Black also pointed out that the long-term goal needs to focus on a commercially viable simplified advice regime to help people in retirement.
He added: “This is where the greatest need is. It doesn’t look like these proposals address that but they feel like a step in the right direction.”
Further Opportunities For Advisers
Andrew Tully, technical services director at Nucleus, suggested that the proposals could encourage millions to save and as their needs become more complex it will create further opportunities for advisers.
He said: “Planning is a key part of how confident someone is about their financial prospects in retirement. Giving more people the chance to access the support they need to make their money work harder is a step in the right direction. We are big supporters of advice and know just how much it can help people achieve good outcomes.
“We believe we should be looking at the advice gap from a different angle and focussing on how we address the planning gap. Having a detailed plan in place leads to significantly higher retirement confidence, so if we can get more people to engage with the planning process, then regulated financial advice, if required, can naturally follow.”
Concerted Effort Needed
Jenny Davidson, commerical proposition director at Quilter, has highlighted that a concerted effort is needed between industry and regulators to really drive change and give firms reassurance through clear advice/guidance boundaries.
As well as a need for regulatory frameworks to be set up specifically for lighter forms of advice or enhanced forms of guidance.
She said: “There is space for more sensible product guidance that is not based on personal information but utilises data on how the majority of people use certain financial products.
“The FCA’s commitment to explore the idea of ‘people like you’ nudges for non-advised savers is a good idea that could be critical to helping people avoid the kinds of choices that could be catastrophic for their later life finances.
“However, forms of ‘personalised guidance’, which has been previously suggested but are not in the FCA’s paper, would likely be a step too far and risk consumers misunderstanding what they are receiving, and a lack of clarity as to who is responsible for the decision.”
Davidson said that the financial advice and wealth management sector needs to work with the FCA to really shape what an effective and commercially viable model of simplified advice looks like.
She added: “While we firmly stand behind the existing distinction between advice and guidance, we welcome a broader scope to better meet the escalating demand for accurate and educational help for consumers.
“We want to work to optimise the use of product guidance and advice, but without blurring the crucial distinction between the two.”
