The FCA has defended its recent paper on simplified advice after regulatory experts criticised the document for “solving nothing”.
In July, the regulator published the findings of its thematic review into simplified advice and non-advised sales, alongside a guidance consultation which aims to clarify the boundaries of simplified advice.
At the time regulatory experts told Money Marketing the consultation “solves nothing” and “raises more questions than it answers” because it fails to say how simplified advice would be regulated or how claims to the Financial Ombudsman Service would be treated.
During a Treasury select committee hearing this morning, Conservative MP Steve Baker cited that Money Marketing article and asked FCA chief executive Martin Wheatley if he was disappointed in the response to the consultation.
He said: “No, quite the contrary. Inevitably everything we put out will get a few critics, but most of the reaction to the consultation was a lot of people coming forward and saying: ‘at last the regulator is prepared to listen to us when we say we can’t quite fit into your regulations or you are a barrier to how we want to operate’.
“We’ve run [six] roundtables since and we’ve had lots of engagement with the industry, both small start-ups and established firms who are very keen to engage with us about how we move things forward. I agree with the comment that it didn’t answer questions, it wasn’t intended to – it was a chance to actually raise the questions about what more we need to do.”
Baker also pressed Wheatley over the size of the advice gap since the retail distribution review was implemented.
He said: “My constituent Gary Heath has been agitating on this and fairly successfully and went through FCA figures and indeed your own interview with Money Marketing. Numbers he’s given me are that, with IFAs exiting the marketing, that leaves 3.8 million people without advice.
“With banks reducing the advice they give he adds another 4.2m people. He also thinks by the time advisers have top-sliced people able to pay fees he estimates about 15 million people will be without advice. Do you consider this a serious problem?”
Wheatley said he did not think the gap was as large as Heath suggested and although there had been a drop off in adviser numbers in the run up to the RDR that had not continued.
He added that “all the major investment banks” are looking at how they can develop a simplified advice model and some smaller firms are also looking at entering the market.
He said: “I think we are seeing a wave of innovation coming in through the market. There is a lot of investment going into financial technology and innovation and we are trying to…make sure we can encourage it.”