Treasury economic secretary Harriet Baldwin has called for a “safe harbour” to be introduced for firms as part of any reforms resulting from the Government and FCA’s review of the advice market.
In the terms of reference for the Financial Advice Market Review, announced in August, one proposal was to create a safe harbour or regulatory carve-out for certain types of advice.
The terms did not offer any more detail on how that would work in practice, but it is thought this would mean limited or no liabilities for advisers recommending approved products or behaving according to set guidelines.
Speaking at an FCA event on robo-advice in London today, Baldwin said fear of regulatory sanctions has held back UK firms from innovating in the past.
Responding to a question on why the UK has lagged behind the US on robo-advice, she said: “Perhaps one of the challenges in the UK is the fact we have had historic examples that have been regulatory scandals and it is that retrospective behaviour that I’m not sure has happened as much in the US.
“The fear of potentially doing something innovative that could down the road be seen as having been wrong is a key reason why it is so important to us as Government to involve the FCA in the advice review.
“What will have to come out of the review if there are to be changes is that if you follow these regulations that effectively that will be a safe space and a safe harbour for you for the rest of time.”
Baldwin added: “As the new technology comes onto the market we need to make sure the statutory landscape is appropriate, and that Government strikes the right balance between regulating the market and knocking down barriers to entry.
“In particular I’m aware that there are firms that have developed new cheaper models of advice but feel there are regulatory issues that prevent them from taking it to market.
“One leading company told us they wanted to enter the advice market online but to comply with current regulations their survey would have to ask 247 questions.”