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Govt unveils major advice review


The Treasury and the FCA are to carry out a major review into financial advice to establish how the market can function better for consumers.

The review will be supported by an advisory panel led by Scottish Widows chair Nick Prettejohn and will look at efforts to bridge the advice gap and the obstacles preventing the growth of affordable advice.

It will cover products including pensions, annuities, savings, mortgages, and insurance. Initial work will be done over the summer with a consultation in the autumn.

Final proposals are expected ahead of Budget 2016.

The review is expected to generate plans to better establish a broad-based financial advice market, create a clearer regulatory environment, and a set of principles to govern the operation of advice.

It will also consider the proportionality of rules, and the implications for the affordability and availability of financial advice, taking in the roles of the FCA, the Financial Ombudsman Service and the Financial Services Compensation Scheme.

Treasury economic secretary Harriett Baldwin says: “Making sure that our financial services sector supports working people at every stage of their lives is a key part of our long-term plan.

“That’s why we’ve launched a major new review to explore what more can be done to make sure consumers can access high quality and affordable advice so they can make informed decisions with their hard-earned money.”

Association of British Insurers director general Huw Evans describes the review as “a welcome step”.

He says: “The new pension freedoms have highlighted how important it is that proper advice is accessible to all, not just those that can afford it.

“This review will naturally take time, so in the short term we want to see steps taken to address the more immediate issues outlined in our action plan in June.”

The ABI plan called for an end to government requirements for those with safeguarded benefits of more than £30,000 to get regulated advice before taking their pot as cash, instead suggesting that the Pension Wise guidance service should be extended to give guidance to those with GARs.

It also proposed a “customer control” mechanism that “must allow providers to carry out customer wishes without fear of future redress actions or restrospective regulatory action where the correct steps have been followed”.

Apfa director general Chris Hannant adds: “Apfa has long been campaigning to reduce the significant regulatory burden on advisers and we welcome Government recognition of the need to examine the legislative barriers to accessing affordable financial advice.

“We are therefore particularly pleased that one of the issues under examination will be the interaction between the regulatory framework for advice and the role of FOS and the FSCS in redress; consumers need to understand that investments can never be 100 per cent risk-free.”

The Government will also launch a further consultation later on this year on how the state-backed guidance available through Pension Wise and the Money Advice Service can be made more effective.

The MAS is currently undertaking its own review process, after an independent report recommended a dramatic overhaul of its services, while the announcement also comes two weeks after after the Work and Pensions Select Committee also announced plans to investigate the affordability and availability of financial advice upon parliament’s return from recess in September.


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There are 26 comments at the moment, we would love to hear your opinion too.

  1. So basically RDR was a crock and they’re finally going to look at it properly. (I hope?) All they had to do was listen to the adviser community in the first place, but no the likes of Sir Hector knew best.

  2. If it’s a review about advice shouldn’t it be led by advisers?

    • em no! Advisers have their own agenda (self-protection) this needs to be about the needs of consumers not what advisers think is best for them!

      • Sadly Tony you seem to know very little about the work that advisers do to protect consumers. Most of us have dedicated our professional lives to doing this and know far more about the subject than any regulator or product provider ever could

  3. But James, they did listen to the adviser community – only just the ones whose business model would be supported by the RDR and were regularly quoted in the media at the time saying it was a great idea! It was only us, the numpty majority, who could see a incy wincy flaw in their cunning plan. Normal top down system. Come up with a plan, agree with your mates that it sounds good, find supporters and hype up their responses, say there has been consultation, ignore the negative feedback, launch the beast and wait for your knighthood. Result.

  4. Nick – this isn’t about advice – this is about how to let the big banks and product providers back in the game. It started with the sacking of Martin Wheatley. It will end with more jobs for the boys – watch this space.

  5. It should be adviser led, and not Scottish Widows who can’t get their own house right! Clients inform me the Scottish widows administration is so poor.

  6. Affordable advice may be possible when the Treasury, FCA and FOS stop stealing our hard earned money, and the crooks in our industry have their assets confiscated instead of the honest ones paying the bill.

    It is the usual political interference, what they need to understand is that the cost of providing advice is prohibitive, and the advice market will reach breaking point as we all get older, many deciding enough is enough.

    As has been mentioned on previous forum topics, the Treasury is quite happy to take industry fines yet allow the FCA to pass compensation shortfalls onto advisers, whilst also maintaining an unaffordable Defined Benefit pension scheme. The message to them must be to get your own house in order before trying to squeeze every last penny out of advisers.

    The remit of this review suggests that this will be the case, let us see.

  7. Kenneth Chapman 3rd August 2015 at 9:49 am

    Does not fill me with great confidence that you pick the chairman of one of the worst providers in terms of any service timescales to lead this enquiry. Agree with James RDR has obviously worked well!

  8. Mr Prettejohn lead yet another review. Does he not represent the organisation, Scottish Widows, who were shown recently to be charging exhorbitant fees to their policyholers seeking to release pension funds? Scottish Widows is owned by the banking sector, the very sector that has ripped the heart out of Financial services, so we have the fox and henhouse scenario yet again.

  9. It is all about major financial institutions being able to sell more products with less responsibility.

  10. Christopher Petrie 3rd August 2015 at 10:33 am

    This is a fight-back from the Life Offices and banks. They want to be able to go back to flogging crap products to their lower-income customers, without fear of the FOS in future.

    It’s nothing more, nothing less than that, hence why financial advisers aren’t being invited to join in. What will be fascinating is the clash between the Treasury – who will be happy for that to happen – and the FCA – who won’t be, as it would basically rip up 25 years of incremental regulation.

  11. I think we need to recognise this as an opportunity to expand the remit of advice, But advisers need to unite and be proactive, not as for so much of the last decade, sit back and complain when the vested interests stitch up the market.

    We advisers need to emerge from our Stockholm cells and define what we want to see for ourselves and our clients and then vigorously campaign for that solution.

    This can go 2 ways: either the Government and the 3fs maintain the status quo or even worse expand the empire further or we grab this opportunity identify the issues which are very close to the 3fs and Government and come up with a plan to resolve them.

    As advisers we have the wit, ability and lobbying power to bring about real change and to make progress but only if we unite, fund representation properly and individually take responsibility for our futures.

    Garry Heath

  12. The Treasury’s now direct involvement in this new review (which is unlikely to reveal anything that we don’t already know) strongly indicates that it doesn’t trust the FCA to undertake it by itself. After all, the FCA has for several years been making vague yet non-committal noises about a framework for simplified/streamlined advice, but to date absolutely nothing has come of it. Perhaps the Treasury has decided that unless it gives the FCA a determined kick up the backside, nothing ever will and it’s easy to see why.

    The FSA presented the blueprint for its RDR to Parliament and Parliament duly approved it. So far, so good. But the FSA took this as carte blanche to go off like a bull in a china shop, embellishing endlessly what Parliament had approved. So what we ended up with was vastly more complicated, onerous and expensive than what Parliament had actually approved. And now we have an advice gap because people of modest means are either unwilling or unable to pay what advisers need to charge to provide and document it in a manner that will hopefully protect them against a future complaint.

    But even this isn’t safe, as evidenced by the FOS having now started to uphold complaints on the grounds that the suitability report is beyond the capacity of a mere mortal to comprehend. Signed disclaimers of liability are commonly disregarded, whilst the complainant’s claim that he “didn’t really understand” what he’d been asked to sign or that its significance wasn’t properly explained to him are routinely accepted with little or no challenge. So what are advisers expected to do? Anecdotally, they’re saying in more and more cases: Sorry Mr Client, I cannot help you (which is code for saying: I’m not going anywhere near this potential hornets nest).

    The classic example of this is Mr Bloggs who wants to do nothing more complicated than access the 25% TFC element of his pension fund/s. Sure, it’s possible to paint a picture suggesting that he shouldn’t do it but, when all else is said and done, at the end of the day it’s HIS MONEY. The FCA refuses to engage with this idea. The adviser is and must forever be responsible for whatever he facilitates.

    After much thought, I recently turned away just such a client, age 60, whose total pension funds add up to slightly less than £74,000. He owes £6,000 on credit cards and wants to buy a camper van to take to Thailand (where, apparently, they cost a lot more than they do here) where his wife owns a home. I couldn’t see how I could do the work (and get it past our compliance people) without charging him an upfront fee of less than £500. He just couldn’t comprehend why this should be so. So where will he go next? I’ve no idea, but that’s not my problem.

    If the government wants these new unfettered or partial access freedoms to work, it HAS TO facilitate a framework within which I can say to the client: Here are half a dozen reasons why this probably isn’t a good idea but, if you want to me to arrange it for you anyway and you’re prepared to absolve me from any future liability, sign here. Job done, end of story. On his head be it. It’s HIS MONEY. Within today’s compliance environment, that just cannot happen and the FCA, on its own, appears to be constitutionally unwilling or unable to allow it to.

  13. I’d imagine that most advisers are now quite happy with their lot and dealing with the higher end of the market, why go back?

    The FSA have essentially got what they wanted with RDR but in the process disenfranchised the majority of the general public. Two prime factors being volume of work and risk. The FOS simply reinforces the thinking. If you (and your client) are bogged down with paperwork and every client dealing Is a risk then it needs to be worthwhile. Goodbye small clients.

    It’s like the Govt mandating that you can only drive a Mercedes or better. And then wondering why so many people have stopped driving…

  14. No one is going to force advisers who have made fee based advice work from changing their model. But advice is necessary and needed by most of our fellow citizens – we need a way to satisfy that need. Those on the top end of the market need to consider at what point their model becomes unviable – not because clients do not want it – but because regulators want to interfere in the rates or types of charging. Similarly how long could you last if the FSCS costs continue to rise in the way they currently have and those costs are shared by a decreasing number of advisers?

    This is the best opportunity for us to change regulation for the better in a couple of decades but only if we unite and have a voice

  15. Douglas Baillie 3rd August 2015 at 1:00 pm

    To what extent can we expect the objectives of The Treasury, The FCA, The FOS and the FSCS to become aligned as they should be?
    The government have created three unaccountable monsters that look after their own interests, and can we really expect them to agree to disenfranchise themselves?

  16. Led by chair of Scottish Widows? Shudder…

  17. The public have voted with their wallets (and purses), they are not willing to pay for financial advice (unless it is included for “free” in the product costs). Therefore although advisers continue to throw stones at the SJP model and shake their collective heads at the “silly” actions of consumers who refuse to see their advisory services in the same way as legal fees (in reality advisers are seen as sales people and who pays the salesman when they buy a car, a TV or a house insurance policy?).

    I totally agree that financial advice should be paid for and valued, but it is not. As with all markets and products it is not the seller it is the buyer who sets the price.

    • Tony I am afraid you are wrong “The public” are indeed willing to pay for advice independent from any product where they understand what it is that they are getting, the value it will add to their lives and where the cost of delivery is transparent

  18. Garry is right this is an opportunity, but we have to take a more balanced approach. Frankly this government has made it clear that they will not protect either the income or working conditions of any profession or industry. Example been legal aid budget and GP working practice.

    Why should they?

    What we as advisers have demonstrate is that we can offer advice at a reasonable cost, but in order to do that changes have to be made to meet that objective. In other words our responses have to framed in such a way that they will have to take account of our recommendations.

    This government nor is the FCA going to have a root and branch reform in regulation.

    The best way to think of how adviser can win the argument agree there is a need for reform and by all means make recommendations but structure them in such a way that the Government and regulators have to can solve the issues.

    Jim Gower below when he produced his finding to the government in 1985

    “strictness of the regulations, should not be greater than is needed adequately to protect investors and this, emphatically, does not mean that it should seek to achieve the impossible task of protecting fools from their own folly. All it should do is to try to prevent people being made fools of. . . One has to make a value judgment on the relative weight to be attached to market freedom and to investor protection”

    The biggest issues ,as I see it is that regulators, the industry and even the adviser profession have not focused on his key finding ,as outlined comments above and addressed those issues

    ” How the public can stopped been made fools off. and how based give the market the freedom that not only encourage innovation and make a reasonable return on investment.

    When Brown created the FSA and replaced all the SRO and control of banks from the Bank of England the spin by Howard Davies and Brown was

    In the eyes of the public. Regulation has been seen as a free service with no cost to the consumer. The reality is that it is not and does cost the consumer thousands. Sadly it is still been promoted that way to the frustration of many good honest advisers, as commented on week in in this blog and many others

    That is the main reason if we concentrate on that point, and make a reasoned argument relating especially to pension freedom that the consumer has to take some responsibility of their actions without been made fools off eventually the cost will take care of themselves in respect FOS FCSC and PI cover and to some degree FCA fees

    Garry is right we have the ability to be a powerful force epically on this review .Let not squander the opportunity to see real change that matters to us and not to other parties in the adviser chain that may not have our interest at heart. We either sit back and let others do the work and suffer the consequences or we take the lead and for a change drive the agenda.

  19. Douglas Baillie ~ In all of this, the Treasury, having decided finally to act on the problems created by the FSA’s RDR, is the top dog. Ultimately, all the other parties will have to fall in line.

  20. Douglas Baillie 3rd August 2015 at 2:19 pm

    Is it too much to hope for that FOS decisions made against an adviser might be open to appeal in common law,in the same way as the complainers can? Far too many complaints to FOS are being upheld against advisers on the flimsiest of evidence with little regard taken of ‘evidence for the defence’. Not all complainers tell the truth, and FOS far too readily fall for it.

  21. All of those who shouted for transparency and insisted advisers offer a fee instead of commission should be hanging their heads. They were told that commission allowed a cross subsidy for those clients unable to pay for advice but no they knew better. I sold my business in Jan 2011 and I charged £200 per hour for my time then. I know some charge less than that even now but there will be some clients who will see any charge as too much irrespective of how much the value of the fund they have invested. Proper advice comes at a price, the government always knew that but hoped advisers would give in and offer their services free to those who could not or would not pay. They are now having to reconsider that stance and it would be better if advisers were included the panel. I wish all who are still in the business a prosperous future

  22. If there is a time that our trade bodies need to get a foot in the door its now ! and they need to be bloody quick about it too.

    Being an anarchist at heart, we do not always have to follow what the man says, I think we have the right for things to go our way every now and again.

    Reading between the lines I think we know the primary drivers for this (banks); and if we get a clean slate I think its only right we have a say in how the picture may look.

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