Regulator’s proposals aim to widen support for consumers making routine money decisions
The Financial Conduct Authority (FCA) has launched a consultation on proposals designed to help more consumers access individualised financial advice without the cost and scope of a full advice process.
The regulator said the changes are intended to make it easier for firms to provide simplified forms of advice for people with more straightforward needs.
Under the approach, advisers would not need to assess every aspect of a customer’s financial circumstances, with the FCA arguing this could make advice more accessible and affordable.
“For too long, the support people need to make important financial decisions has been out of reach for many,” said Sarah Pritchard (pictured right), deputy chief executive of the FCA. “A market that provides good quality, lower cost simplified advice alongside comprehensive financial advice and targeted support will better support people making decisions about their financial lives.
“We want to see more people getting supported, who aren’t currently, and a market that innovates and offers tailored services to meet differing consumer needs. We welcome everyone’s views on whether our proposals will achieve our aim of building firms’ confidence to offer a wider range of advice and ultimately to help consumers navigate their financial lives.”
Although firms can already offer simplified advice, the FCA said take-up has been limited. The consultation includes proposals to adjust rules while keeping consumer protections in place, including combining and streamlining suitability requirements; setting clearer expectations that advisers gather “sufficient” information; and making suitability communications shorter and more focused on consumers.
The FCA also wants to give firms more flexibility in how ongoing advice services are designed and delivered. This would include moving away from a fixed annual suitability review to reviews scheduled based on a client’s needs.
Separately, the regulator said it is beginning a discussion on the future of trail commission, citing the need to modernise rules and reduce the risk of consumer harm.
The FCA said it is not proposing changes to qualification standards for advisers, nor to adviser charging rules. It added that advice would still need to be paid for through agreed adviser charges, rather than provider-paid commission or cross-subsidisation.
The regulator noted that from April, some financial firms will be permitted to offer targeted support and to suggest products to consumers based on what would be recommended to others in similar circumstances. It said that while targeted support could help groups of consumers, many people will still need or prefer advice tailored to their own situation.
The FCA described the consultation as the final element of its policy work on ensuring the advice market works effectively for consumers who rely on it for their financial futures, aside from updates to its perimeter guidance.
“The FCA’s plans are an important step towards closing the long-standing advice gap in the UK,” commented Rob Hillock, head of personal financial planning at leading independent financial services consultancy Broadstone. “Too many people are making complex decisions about pensions, investing and retirement without any support, so creating a clearer framework for targeted support and simplified advice could significantly improve access to help.
“It is interesting that the regulator is opening up the possibility of other institutions to offer simplified forms of advice, including banks, insurers and asset managers. This could move the framework away from holistic, long-term planning and more towards the selling of specific products which brings risks but could also encourage growth in the financial advice profession.
“The key will be ensuring consumers clearly understand the difference between guidance, targeted support and full financial advice, and that firms have the confidence to engage with customers without excessive regulatory risk. If implemented well, these reforms could make financial support more accessible and affordable, particularly for people approaching retirement who face some of the most complex financial decisions of their lives.
“This could fundamentally change how people access financial help in the UK, moving the system away from advice being only for the wealthy towards more scalable support for the mass market.”
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