When the Financial Advice Market Review recommendations came out, we were a little disappointed. There was good news: the Financial Services Compensation Scheme levy review; the new pensions advice allowance; the recommendations on tax relief for workplace pensions advice; and clarifying the boundaries on simplified and streamlined advice.
There was also less good news, with the longstop being ruled out without properly addressing the issue or giving consideration to alternative proposals. And then there was what amounted to mere tinkering around the edges, such as the recommendations that Financial Ombudsman Service publish more data and engage further with the industry.
In short, FAMR promised several further consultations but ultimately failed to deliver the radical reforms that Apfa and others had been calling for.
It is now nearly a year since the report was published, with two years to go until the Treasury and FCA must report on progress against the recommendations. What has been achieved so far?
Looking for progress
The answer is that there has been a fair amount of activity, even if the recommendations themselves were so cautious that the actual impact is limited. The FCA and the government have published several promised consultations on topics such as the definition of regulated financial advice, the £500 pensions advice allowance, the FOS approach to data publication, and the FSCS levy approach. But of course, the nature of the consultation process means we won’t see anything concrete come out of these papers for several months.
The FCA’s Advice Unit has also already been set up, although we remain doubtful that more automated models of advice are the silver bullet to boosting accessibility and affordability.
After intensive and lengthy engagement with Apfa and others on its scope, the end of 2016 saw the publication of the FSCS levy review. 2017 must be the year where we see a commitment by the FCA to far-reaching changes in this area as the current approach is unsustainable, unfair to advisers and does not allow firms to plan, invest or innovate.
Thankfully, some of the options suggested in the paper – specifically those around provider contributions and changes to funding classes – look promising and, had they been implemented five years ago, would have saved advisers between a third and 60 per cent of the fees paid. We’re pleased that the FCA appears to have recognised Apfa’s arguments about the need not just to shift allocation but also for radical changes to cut the scale of the levies. The nature of the PII market has also played a significant role in our discussions with the FCA and we would be keen to see the possible market review happen later this year.
Turning consultation into action
I think the big concern is that while there has been a flurry of consultations in FAMR’s wake, the world has changed significantly since the final report. There is a new Prime Minister and a government with new priorities in the wake of Brexit. It would therefore be unsurprising if improving access to financial advice fell down the political agenda. We hope that the momentum and will to act on the FAMR recommendations – cautious as they are – will continue and 2017 must be the year when we see concrete change, not just further consultations.
Caroline Escott is senior policy adviser at Apfa