Advisers and the wider profession have warned that the lack of visible progress on the Financial Advice Market Review is fast turning into apathy towards what is supposed to be a flagship project to reform advice.
Advisers say they have not been kept in the loop on developments, while providers have called for clarity on what is required of them and by when.
There are now six months to go until the FCA and Treasury are due to submit a progress report on the FAMR to Treasury economic secretary Simon Kirby and the FCA board.
Money Marketing has sought to establish what progress, if any, is being made by the four bodies tasked with delivering the 28 FAMR recommendations: the FCA, Treasury, the Financial Ombudsman Service and the financial advice working group.
The FCA was the only organisation not to give further updates on the recommendations it is responsible for, beyond pointing to the initial timeframes set out in the FAMR report.
The FCA has been given responsibility for the bulk of the FAMR work and is overseeing 11 recommendations.
The Treasury is in charge of six recommendations, the working group three, FOS four and the FCA and Treasury are jointly responsible for three recommendations.
One recommendation – to review the lack of a long-stop – has not been delegated to any organisation and will be considered as part of the planned review of FAMR outcomes in 2019.
So far, five of the recommendations have produced the results set out in the FAMR report.
The Treasury has delivered on one with the launch of its consultation last month on introducing a £500 tax-free pensions advice allowance.
The FOS has established a section for advisers on its website and has started holding regular roundtables with the industry.
Other recommendations that have been completed are the launch of the FCA’s robo-advice unit and the setting-up of the financial advice working group.
Four recommendations have an indicative timeframe of later this year while 15 are due to be completed during 2017. The pensions dashboard is set to be available to consumers in 2019 and two other recommendations – improving suitability reports, and making sure Mifid II does not impact on delivering streamlined advice – are listed as “ongoing”.
Financial advice working group chair Nick Prettejohn admits there is a lot of work going on as part of the working group but “not a lot to show for it” at this stage.He says at the end of the year the group will discuss progress “more openly”.
The group is expected to publish a shortlist of terms to describe advice and guidance later this year, as well as publishing a guide early next year on ways employers can support employees’ financial health. Also in early 2017 the group will start initial testing of what it calls “thumbs and nudges”, that is, ways of prompting consumers to seek advice.
Prettejohn says: “We have had a number of group meetings now and we have set up sub-groups on each of the recommendations. We are at the stage of scoping out the work and planning what we are going to do. The timeframes in FAMR are still roughly what we are working towards.”
Old Mutual Wealth chief distribution officer and financial advice working group member Richard Freeman is hopeful the work the group is doing on nudging consumers to advice will yield results.
He says: “Behavioural nudges have been used in other areas to prompt change in attitudes which are in the wider public interest. If successful, this could be an exciting opportunity to change the way people in the UK approach their financial choices, and we are currently working on that set of behavioural nudges.
“With support from the Government, prompts encouraging financial engagement and the uptake of advice could be extremely effective, but it will probably require a meaningful commitment from Government in order to publicise that effectively and deliver results.”
Freeman says the work on defining guidance and advice will require some “careful thinking” to keep terms relevant and give the industry the right parameters to work within.
He says: “The success of this work will largely depend on engaging with the regulator as the industry will need its support if we are to find and apply better terminology.”
A Treasury spokeswoman says there will be a consultation launched before the end of the year on amending the definition of regulated advice under the existing Regulated Activities Order.
Meanwhile, the FOS has made progress on the other two recommendations it is in charge of. It was asked to publish additional data on uphold rates, which was included in this year’s annual report, and it intends to start a consultation on further information it could provide as part of its review of published complaints.
The FOS was also tasked with expanding its independent assessor report and confirms this will be completed in the 2017 report.
The FCA declined to provide a progress update. Money Marketing understands talks on the Financial Services Compensation Scheme funding review are underway, with a consultation expected before the end of the year. The Personal Finance Society and Apfa have been lobbying on the funding review and other FAMR objectives.
But while work on FAMR is bubbling away at a high level, engagement at the coal face of the advice sector on what is being done and what will be delivered is low.
Threesixty managing director Phil Young says: “Anyone sat on the adviser side of things would be completely disengaged with it now. In terms of the outcomes from FAMR there is no magic wand. Everyone felt a bit deflated that the report was not more bold and dramatic.”
Young adds that the way some of the recommendations are being progressed will not inspire confidence among advisers.
He says: “If you look at something like the pensions dashboard you have got 11 insurance companies involved in it. Most people’s starting assumptions, including people that work in insurers, is it is torturous trying to get something done with one provider. If you say to advisers the pensions dashboard is being designed by a committee of 11 providers you will get hoots of derision about much it will cost and how long it will take to build, never mind how good it will be at the end.”
It is not just advisers who are feeling as if they are in the dark about progress on the FAMR recommendations. In a letter published this week, Treasury committee chairman Andrew Tyrie reprimanded FCA chief executive Andrew Bailey for not keeping the committee in the loop on progress with the FSCS funding review.
The committee plans to hear evidence on FAMR and the FSCS review in the autumn.
AJ Bell platform technical head Mike Morrison also wants to see clarity on the FAMR work and a time-table of how it is progressing.
He says: “It would focus the minds of the industry a little bit if everyone knew what we were aiming towards. At the moment there is all of this talking about guidance and advice and a whole raft of other changes, but where does it leave us?
“Advisers and providers need to plan. With the change of political leaders, perhaps now would be a good time to get this nailed down and get a framework sorted and we can work towards changing the pensions and savings culture to help people.”
Recent political upheaval is seen by independent regulatory consultant Richard Hobbs as a means of potentially slowing momentum on FAMR. He argues since FAMR was published in March, Government priorities have changed and the most urgent issue in Westminster is Brexit.
Hobbs says: “The Brexit vote and consequent Cabinet reshuffle has caused a great deal of reprioritisation. FAMR was a joint FCA and Treasury initiative which was unusual – it was then Chancellor George Osborne’s frustration of regulation getting in the way of his reforms.
“Philip Hammond has less reform zeal and has a different set of priorities now we have had the Brexit vote. If it had been business as usual FAMR would have got greater prominence but at the moment all of the energy will be sucked into working out what to do about financial services in a post-EU world.”
Expert view: Keith Richards
The Personal Finance Society has been included in a number of FAMR consultations, including the first roundtable group which met in May to discuss potential changes to FSCS funding. FSCS funding reform was deemed to be one of the most important issues to come out of FAMR given the concerns of the advice community and the fact the current system represents a deterrent for new entrants into regulated advice.
Discussions have centered around fairer funding and finding ways to reduce or eliminate the shock of additional levies that so incense advisers.
Discussions around smarter communications are also ongoing, focusing on the need for simplification of suitability reports. The FCA has recognised how overcomplicated suitability reports, which are proving ineffective from a consumer perspective and overly bureaucratic for advisers, could be streamlined to improve clarity. I am confident progress is being made on this front.
Discussions around the definition of advice and guidance are also continuing. I am optimistic improvements aimed at providing greater clarity are actively being pursued, however this will be an ongoing challenge.
The FCA and Treasury have been open and pragmatic in their approach. They have been open in their dialogue with stakeholders, including during the process of obtaining input from stakeholders such as the PFS.
However, in the absence of any definitive results or conclusions, they have not yet been in a position to make any major announcements. I expect we will start to see some decisions being finalised, and announcements made fairly soon.
As a professional body, we have been repeatedly asked to facilitate introductions and input from practitioners, and we are satisfied with the process of engagement with practitioners in addition to associations.
We are in the middle of a process that is likely to be slower than many advisers would like to see. Nonetheless, it is a significant step in the right direction and it is the first time the Government has been involved in such an ambitious effort to reform the market, aimed at increasing access to advice – rather than additional regulation which often reduces access.
Keith Richards is chief executive of the Personal Finance Society