With all that has happened in the last few months, it would have been easy for the FCA to become distracted from the Financial Advice Market Review. So just where has FAMR got to during the six busy months that followed its launch?
Some in the industry were quick to criticise FAMR for its lack of substance and its calls for further consultations and guidance instead of immediate actions. We argued what may have seemed like a slow start from FAMR was in fact the most appropriate route for the FCA to take.
If the ultimate aim of FAMR is to help establish a firm foundation for mass-market financial guidance that will boost consumer engagement and carry an impact for generations to come, then a quick solution was never going to be the best answer.
However, the FCA has not hung around when it comes to a number of key areas set out by FAMR, making visible progress to address some of the more specific recommendations, such as the increase in the tax and National Insurance exemption for employer-arranged advice from £150 to £500. A £500 figure has also been agreed in response to the recommendation that consumers be allowed access to a small part of their pension to pay for advice.
Although still in its early stages, FAMR’s recommendation to set up an advice unit focusing specifically on helping firms develop automated services is showing the first signs of development, with the regulator hosting a series of regular events dedicated to robo-advice over the course of the year.
But perhaps the strongest response has been the remarks made by the Treasury in this year’s Budget that the Government may introduce legislation forcing providers to contribute to the pensions dashboard that was originally set out by FAMR. A dozen of the largest providers have already signed up to create a prototype of the pensions dashboard by March 2017, with the Association of British Insurers managing the pilot project.
While each of these developments are a big step in the right direction, there are a couple of important issues which should also have been addressed by this stage. Many of the recommendations calling for the creation of illustrative case studies or the communication of best practice should have been quick wins for the regulator but there has been little visible progress made thus far with many of these.
Reassessing the definition of regulated advice in line with the Markets in Financial Instrument Directive was always going to take some time to implement properly while the uncertainty of Brexit may well have created some extra delays. It is, however, one of the most crucial recommendations that arguably underpins everything FAMR sets out to achieve. Any progress made in the meantime by both the regulator and the industry may have to be redone at a later stage should any of these developments not fit with the new and improved definition of regulated advice.
Amidst the mixed reaction to the initial launch of FAMR, Iress welcomed its approach and overall aims but, six months down the line, some more definitive updates and specific target dates for when recommendations are likely to become a reality are overdue.
Without these, there is a real risk that many of the important ideas proposed by FAMR could end up in the long grass. We would therefore urge both the FCA and the Treasury to get communicating with updates on progress to keep businesses across the sector engaged, and hopefully enthusiastic, about FAMR and the future of advice.
Chris Pitt is head of product and consultancy at Iress