“Consumer confidence is key to the UK and the world’s financial services work, but I don’t think clients will have heard of the long-stop before, and so will not be deterred from seeking advice if it is introduced.”
Falling short
He said the rule would be beneficial to the business in the long-term to protect advisers.
“Our industry has fallen short in its engagement with the clients,” Churchouse added. “This points to the importance of the annual review so clients can touch base with their adviser or provider to see how it’s going.”
The FCA’s predecessor, the Financial Services Authority, previously reviewed whether a long-stop was needed and deemed it important that consumers could claim redress for advice about long-term financial products, such as pensions, investment and mortgage products.
The challenge
Danny Cox, head of communications at Hargreaves Lansdown, said the introduction of a long-stop is unlikely to have much impact on the business.
But he said the challenge is to provide the right consumer protection on advice where the outcomes are not known for many years: “For the vast majority of right-minded businesses has been and never will be a problem.”
There were 254 cases taken to the ombudsman against financial advisers during 2014-15, according to the FAMR. Of these complaints only 30% (76 cases) were upheld.
Structurally odd
Jeremy Woodley, director at The Fry Group, said he would like to see the long-stop considered.
However, he said the long-stop is only one of the “structurally odd things about our industry that leads to things like the advice gap, FSCS levies and talks of safe harbours”.
Woodley argued that a long-stop is unlikely to deter clients from making complaints, because the Financial Services Compensation Scheme is there for consumers to fall back on.
“With the talk about the advice gap, there might be an opportunity to have the long-stop introduced, but I think it is only one of the issues in the advice industry.”
The FAMR was published on Monday.
