The Financial Advice Market Review could see new advisers playing a role in plugging the advice gap but looks unlikely to deliver a long-stop due to provider opposition.
The return to some form of commission, which has ignited fierce debate since Money Marketing revealed the proposal last month, is thought to have split the expert FAMR panel ahead of Chancellor George Osborne outlining any measures for advice market reform in the Budget next month.
Further details about the options on the table have since emerged, and Money Marketing understands the panel is keen to establish a “regulated role for new entrants to the advice market”.
The panel is not thought to be considering a wholesale shift on the minimum qualification requirement for advice from QCF level four to QCF level 3. Instead panel members would like to see one of two frameworks put in place.
The first option would be a framework that allows less qualified advisers to give advice on certain products or through a decision tree process, but supervised by a qualified adviser.
The second option would be a process designed by the qualified adviser but delivered by a lower qualified adviser.
The introduction of a long-stop has also been debated, but the proposal does not have the backing of all the panel members.
A source says: “The difficulty is finding a system that works for the biggest firms and the smallest firms. The long-stop is important to small firms, but the economics are different when it comes to providers. Providers neither want nor need a long-stop.”
Apfa director general Chris Hannant says Osborne is likely to give a high-level overview of the kind of advice market the Government wants to see, with details on the framework and necessary qualifications worked out at a later stage.
He says: “What is most important is we get a mechanism where there is new blood in and more people to give advice, but that can be delivered in a shorter timeframe than a full advised process with less client information collected.
“The long-stop is about expanding the market for full advice. The whole system around advice liability is broken and needs to be addressed.”
Personal Finance Society chief executive Keith Richards says: “There are possible options being considered which could include the introduction of a new level of financial advice, or a qualified guidance solution, both of which are likely to have an appropriate level of qualification but below that of evel 4.
“The use of decision trees has never proved particularly consumer centric, but considerations of how to structure the new level of simplified advice or qualified guidance will be key and will almost certainly involve a defined range of lower risk investment and savings vehicles.”
Richards backs the reinstatement of a long-stop, arguing there has been significant reform since the Law of Limitation was varied.
He says: “The long-stop was removed at a time when a significant volume of 25-year savings products were a prominent feature of the market, and therefore the 15-year long-stop was appropriately changed to better protect consumers and influence the behaviours of those selling long-term products.
“As reform of the market is so clearly evident and the lack of capped liability is a barrier, it is only right a long-stop should be reinstated and it should not therefore be seen as taking away protection from consumers, especially as there is no evidence of complaints exceeding 15 years. It should also be noted that the Financial Services Compensation Scheme operates a 15-year long-stop.”