The latest from the FCA, plus some industry comments below;
More people could access financial advice, under proposals set out by the Financial Conduct Authority (FCA).
The FCA is consulting on how to make it easier for firms to give more simplified forms of individualised financial advice to consumers.
Simplified forms of advice can help consumers with more straightforward needs and do not require a full assessment of all their financial circumstances, making it more accessible and affordable.
Sarah Pritchard, deputy chief executive of the FCA, said:
“For too long the support people need to make important financial decisions has been out of reach for many.
“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.”
Firms are already able to provide more simplified forms of advice but not many offer it. To encourage innovation and open access, the FCA is proposing to make small changes while maintaining appropriate consumer protections, which it believes can revitalise the sector, including:
- Simplifying and consolidating the suitability framework into one set of common rules and expectations.
- Clarifying existing flexibilities in suitability rules with an expectation that advisers consider ‘sufficient’ information.
- Rebalancing the role and purpose of suitability communications to support firms making them concise, consumer-focused and proportionate.
- Changes to give firms greater flexibility in how they design and deliver ongoing advice services. This includes moving from a fixed annual suitability review to periodic reviews based on clients’ needs.
The FCA is starting a discussion about the future of trail commission to modernise the rules and to prevent potential consumer harm.
Qualification standards for advisers will remain unchanged. The FCA is also not proposing to change the adviser charging rules. Advice will still need to be paid via agreed-upon adviser charges rather than provider-paid commission or through cross-subsidisation.
The FCA has already acted to help consumers get more support. From April some financial firms will be allowed to offer targeted support and suggest products to consumers based on what they would recommend to those in similar circumstances.
While targeted support will enable support to be given to groups of consumers, many consumers will need or value individual advice tailored to their specific circumstances.
Other than updating our perimeter guidance, this is the final piece in the FCA’s policy work to make sure that the advice market works for the millions who depend on it for their financial futures.
INDUSTRY COMMENT
Commenting on today’s publication of the FCA’s consultation on simplified advice, Jane Wilson, Targeted Support Lead, KPMG UK, said:
“The drive to create simplified advice is a welcome step toward broadening access for consumers who are currently priced out or underserved by the traditional advice market, complementing the recent launch of the FCA’s targeted support regime. Importantly, the proposals make clear that this is not about lowering standards: the retention of QCF Level 4 as the minimum qualification helps preserve trust and professionalism in the advice market.
“Simplified advice has the potential to meet consumers’ more straightforward needs, while acting as an important springboard to more holistic advice where appropriate. The FCA’s focus on simplifying rules where they overlap with Consumer Duty requirements should also help firms design clearer, more efficient advice models without duplicative or unnecessary complexity.
“The priority now is ensuring that simplified advice is affordable for consumers, commercially viable for firms, and supported by strong conduct guardrails that prevent mis-selling or consumer confusion. Clear and aligned expectations from the FCA and FOS will be critical to giving firms the confidence to invest and innovate. If implemented well, these reforms could materially increase access to financial advice and help rebuild trust and confidence across a much broader cross-section of society.”
Rob Hillock, Head of Personal Financial Planning at leading independent financial services consultancy Broadstone, commented:
“The FCA’s plans are an important step towards closing the long-standing advice gap in the UK. 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.”
The Consultation Paper can be found here: https://www.fca.org.uk/news/press-releases/fca-plans-help-people-get-more-financial-advice-important-decisions
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