FCA chief executive Andrew Bailey has said that low interest rates may be putting people off seeking financial advice.
In a speech at Mansion House, Bailey said that the provision of advice was a “major area of attention” for the regulator, and that it was “crucial” given consumers now have more choice over what to do with their savings.
While he praised the RDR for removing product biases and improving professionalism, he said that too few people were accessing advice, in part due to the low interest rate environment.
Bailey said: “I would submit that both of these outcomes were sensible. Were there other outcomes? Yes, and I am quite prepared to recognise that there are concerns about a gap in the advice market. I think that gap is probably exacerbated by low interest rates, which mean that the cost of advice looks less favourable when compared to returns. And this probably has more of an effect in areas where the fixed cost of advice – which is inevitable – looks unfavourable relative to the smaller amount of investment involved.”
The FCA is independent of Government. However, The Bank of England, which sets interest rates, oversees prudential regulator The Prudential Regulation Authority.
He said: “It is important that we do all that we can to provide clarity on the boundary between advice and more general guidance. I strongly agree that the more uncertain the boundary, the more advisers will rationally aim to keep away from going nearer to it, something that is not helpful.
“My commitment is that the work on this important issue will go on until firms can operate successfully to the benefit of consumers using common sense and good rules of thumb.”