The FCA’s director of policy has shed light on the regulator’s approach to the advice market, backing a number of measures intended to improve access to advice.
In a presentation at the Personal Finance Society Festival of Financial Planning today, David Geale told advisers that, on the back of the Financial Advice Market Review, the regulator was keen to see more innovation to make sure more consumers sought advice.
He said: “A healthy market should provide a range of accessible advice and guidance services for all.
“We know consumers don’t take enough interest in their long term financial planning. They are disengaged.
“I don’t think anyone can shout victory just yet, but I do think there have been positive steps in the right direction.”
He noted that “advisers need more clarity on the boundary between advice and general guidance,” and hoped that the FCA’s new definition of advice, due to come into force in January, would give more companies confidence to set up services to provide guidance services for customers with simple needs without fearing they would stray into regulated advice.
Geale also reflected on the regulator’s recent review of the Financial Services Compensation Scheme, noting that having some form of lifeboat fund “inspires confidence” in financial services among the public.
He said: “The unanimous view coming from right across the financial services sector is the compensation scheme is a huge benefit.”
However, the regulator is working on ways to make sure firms which are liable for failures pick up more of the bill, Geale said.
He could not rule out volatility in future levies for advisers though.
He said: “Will we be able to reach a position where we never have an additional levy? No, because events happen.”
Geale also shed light on why the FCA did not lean towards more prescriptive regulation of the professional indemnity insurance market during the review. For example, he said that the FCA abandoned the idea of preventing advisers from selling products they did not have PI cover for because, currently, insurers do not tend to individually risk rate small firms.
Instead, they often will withdraw cover or decide not to offer it on a blanket basis if the FCA begins reviewing a sector, meaning that low-risk firms would also be left without cover and therefore be unfairly prevented from advising on specific areas.
While acknowledging that the FCA “can’t have a supervisor outside every firm,” Geale said the regulator wanted to be more proactive about identifying possible future risk areas with more oversight work, for example, like the way it has looked into the defined benefit transfer market recently.