When you think of all the labels attached to advice in recent years, it is no wonder we need a review of the market – if only to cut down on all the jargon. We have had basic advice, basic advice plus, restricted and independent advice, simplified advice, robo-advice, and of course, full regulated advice.
Yet for all the wordplay, regulators and policymakers have not come close to designing a regime that manages the holy grail of an innovative, accessible advice market which provides adequate consumer protection and does not cost the earth.
The Financial Advice Market Review is one attempt to solve this conundrum. It is the Government’s prerogative to put out a consultation with no detail about what is proposed, and that is exactly what has happened on plans to create a regulatory “safe harbour”.
The industry has sought to fill in the blanks on how a regulatory carve-out would work in practice, and indeed whether it can work at all.
The thinking goes that by relaxing the rules for simple transactions, the cost burden to both firms and consumers could be lowered and therefore the advice gap could be bridged somewhat.
Of course, this would represent a dramatic change in stance from a regulator that has always sworn advice has to comply with RDR rules and must carry the uncapped liability that goes with it.
The Government is clear it wants to see a safe harbour introduced, but the FCA less so. Without wanting to break with tradition, there is some degree of sympathy for the regulator here.
On the one hand, limiting liabilities means reducing consumer protection at a time when the lack of mass market advice brought about by the RDR is compounded by the need for advice triggered by pension freedoms.
On the other hand, the current situation is untenable. Advisers are at breaking point in trying to cover never-ending regulatory costs, and with fewer clients to show for it.
As Apfa director general Chris Hannant points out, the way to deliver mass market advice might not be about reinventing the wheel but tackling the known crunch points, such as FSCS levies and the lack of a long-stop.
Advisers are crying out for way to serve the lower end of the market. If there is a way to achieve this without opening the floodgates to the ‘stack ‘em high, sell ‘em cheap’ philosophy of the banks and insurers, I am all for it.