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FCA: We are working to boost access to advice

FCA executive director of strategy and competition Chris Woolard

The Financial Advice Market Review published its recommendations a year ago and we are taking this opportunity to reflect on the significant progress already made and, importantly, the work still to be done.

FAMR was launched jointly by the Treasury and the FCA in August 2015 amid concerns that the advice market was not working well for consumers. The review concluded that much could be done to help deliver affordable and accessible advice and guidance to everyone, at all stages of their lives.

In particular, FAMR recognised that technology can play a significant role in driving down costs and enabling firms to engage with consumers more effectively. It recommended that the FCA should set up a dedicated team to help firms develop mass-market automated advice models.

Smoothing the path to advice

We set up our Advice Unit in May 2016. It provides regulatory feedback and support to such firms. It is currently working with 10 firms with the potential to reach large numbers of consumers and will shortly start working with a further cohort. We have also published proposed guidance on streamlined advice, which we hope will also be helpful to firms in this space. It proposes practical guidance for firms looking to develop streamlined models and gives real-life examples of both good and bad practice.

As well as addressing cost factors, the review also recognised the importance of tackling barriers which prevent or discourage consumers from seeking out advice and other forms of support. Many people are disengaged, unsure how to find good advice or lack confidence with financial decisions. FAMR proposed a number of measures to help consumers engage more effectively with advice and guidance.

Much of this work has been supported through the work of the financial advice working group (a stakeholder group set up to support the FAMR work), which has created a guide for employers to support their employees’ financial well-being, as well as developing a set of “rules of thumb” and principles for nudges that can prompt people to take action to improve their financial well-being.

Politicians on board

The Government has also taken action, introducing changes to the regulatory perimeter designed to assist firms working with customers to give more help without inadvertently crossing the boundary into regulated advice. Measures have also been introduced to help consumers to pay the upfront cost of pension advice: people are now able to withdraw £500 from their pension pot at any age to pay for retirement advice and a £500 tax exemption for employer arranged pension advice is also available.

These actions form part of a wider programme which over time will deliver the FAMR objectives. The FCA has also been working together with the Treasury to develop indicators to provide an overview of the advice market, reflect the FAMR success measures, and establish a baseline to help monitor developments as the FAMR recommendations are implemented.

They will also serve as a benchmark against which the FAMR outcomes will be compared in future years. The indicators will be published by June.

Brighter prospects

Taken together, the FAMR work has the potential to really improve the affordability and accessibility of advice and guidance. However, this can only be achieved if there is continued commitment on all sides – not only from regulators and government, but also employers, consumer groups and the financial services industry.

Advisers (large and small), pension providers and investment firms, who deal with consumers on a daily basis, have a real opportunity to make the most of the momentum behind FAMR and play their part in making the market work better for consumers.

Christopher Woolard is executive director of strategy and competition at the FCA

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. It seems amazing to me that FCA say we all have to play our part in reducing costs of advice. Our regulatory costs over all just keep going up and up and up but they want us to be able to charge less and less and less. Just how on earth does that work Mr Woolard?

    • It doesn’t Marty, it’s like the bloke who spends 5 years planning to start a pension…If he keeps talking about it then it somehow feels like he’s taking positive action! Displacement activity I think it’s called.

      Products can be constructed to be cheap and sufficiently incentivised, sure enough, but if RDR is about the ‘advice process’ and ‘knowing your client’ as opposed to product-shifting, then it’s not possible to have cheap; so what is the answer? (I suspect I already know the answer and where this is all headed)

    • I note that APFA, in its report on regulatory costs, says the following: “Our research found that on average, small to mid-sized firms are spending 11% of their income on direct and indirect regulatory costs. Of this, 3% is spent on direct fees and levies, and 8% on indirect costs. The proportion of income spent on direct fees is the same as over the previous two years while for indirect costs it has fallen from 9% in both 2013/2014 and 2014/15.”
      So, no evidence of the alleged rise in regulatory costs and, if advice costs are £150 an hour, a reduction of 11% (taking it down to £133) hardly seems to make it very much more affordable. Some form of automation seems the most likely way to reduce costs significantly and make advice affordable for people with small amounts to save and invest.

  2. Do you know the saddest part of this whole sorry, story is …

    Its the fact that senior figures (like Woolard and others) at the FCA cant be honest with themselves let alone the industry !

    What we have is a malevolent, regulator who through their own shortsight, are trying to build an industry to its own ideal, building it to run how they think it should run, building an industry to suit its own ends ……..
    Now this really is the tail wagging to dog, as it should be the other way around, we all know good (and bad) advisers and good (and bad) advice is 5 maybe 10 years ahead of the FCA, they should concentrate more about good regulation and actually engage with people and be ahead or at the very least along side.
    But no…… they would rather drag people back who have long since past because its NOT what they (FCA) want or believe how it should be done,

    How often do we read of the regulator acting on problems going back 5 years or more !!! almost every case is historic.

    In short I dont think its your job to “fix” the advice problem (even if there is one ?), its not your job to “seek or work out” whats affordable and whats not….
    do your bloody job let the industry grow organicly and “regulate”

    All you do all day, is try to level water tipped at 45 degrees like a snaggle toothed bumkin !

  3. Have you ever started (from scratch), built up, run and been responsible for meeting all the administrative, financial and regulatory overheads of an IFA practice Mr Woolard? Or, come to that, ANY small business?

    Should the answer be No, perhaps you could explain why any of us out here should accord any credence to your claim that the FAMR is making great progress towards helping (the regulated advice community) deliver affordable and accessible advice and guidance to everyone. Personally, I can’t see it but I may be missing something.

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