Last week, the chair of the Treasury committee tabled an amendment to the financial services and markets bill which would allow the government to create a new ‘personalised financial guidance’ regime in the UK.
Under the proposed regime, provider firms who do not recommend a specific product or course of action would not risk this guidance being deemed as regulated advice.
If it goes ahead, the amendment could give firms confidence to offer people who choose not to take advice, or cannot afford advice, with more tailored guidance without fear of straying over the advice-guidance boundary.
Tom Selby, head of retirement policy at AJ Bell, said if the FCA is able to encourage more people to take good quality advice and invest for the future through this simplified advice initiative, that would be a good thing.
“However, it is important this isn’t somehow viewed as a one-and-done solution to the advice gap challenge,” he said.
“Even if simplified advice takes off, there will be millions of savers and investors who either can’t afford to pay for advice or choose not to take it, or both.
“Low-cost advice will likely only provide a partial solution for a relatively small subset of the population, with the majority relying on the information and guidance they receive from other sources to make good decisions when it comes to saving and investing.”
Supply vs demand
In the consultation paper the FCA said in order to see an increase in the proportion of consumers with large amounts of excess cash having the confidence to invest these savings for better longer‑term returns, it is proposing supply and demand side changes.
On the supply side, firms have raised concerns on how best to interpret the existing flexibility within current suitability rules, noting prospective mis‑selling liabilities if advice given is not suitable.
Additionally, firms have raised the viability of providing advice to mass‑market consumers – especially where there is a human element involved – given requirements around suitability and the initial customer fact find, adviser qualifications and adviser charging.
In addition to the proposals mentioned, on the supply side, there will be new guidance clarifying suitability obligations so that firms have confidence on the minimum level of information expected for the fact find.
This aims to reduce the time needed for the fact finding and resolve some firms' liability concerns.
On the demand side, the regulator said consumer research shows that less wealthy consumers do not tend to access professional support with their finances as often as wealthy consumers, though many want more support to make financial decisions like investing in a S&S Isa.
