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.