At first glance, the Government’s announcement of a review into the advice market did not look that explosive. The review talked of lofty but ultimately vague aims of changing the sector to work better for consumers. Woolly references to “safe harbours” and “amending regulatory perimeters” did nothing to help persuade people that here was something worthy of note.
Yet the vague missives from the Treasury belie what could amount to a fundamental overhaul of the advice profession and how it interacts with one of the biggest issues advisers are facing today: spiralling and unsustainable regulatory costs.
The review offers advisers a platform on which to make the case for wholesale regulatory reform. The “exceptional costs” of Keydata, Arch cru, and now collapsed Sipp advice firms show no sign of abating, and advisers are bearing the brunt of these costs.
Personal Finance Society chief executive Keith Richards says advisers should make this argument through a consumer-focused lens. The professional body seems to be making headway with this approach.
Yet the numbers also speak for themselves. Money Marketing has heard from several firms whose FCA fees have gone up threefold in the space of a year, with some experiencing even more severe hikes.
What smarts is the advice review, and the FCA’s similar Project Innovate, contain the tacit admission that the advice gap is a real problem and, while it boosted standards in some respects, the RDR was not the cure-all for the market the regulator expected to be. Never mind that advisers were beating that very drum in all the years leading up to the reforms.
If the advice review manages to deliver more proportionate regulatory costs, then firms may start looking at ways to help those would-be clients who have been left out in the cold up until now. But it could also signal a model for banks and providers to be the ones to plug the advice gap – is that a price advisers are willing to pay?
Faced with its flagship pension freedom reforms being left in tatters without a solid advice system to underpin it, the Government has taken matters into its own hands with this review. The question is, with the Treasury at the helm and the FCA its obedient servant, at the end of all this who will be the ones to question whether this revolutionary advice review delivered on what it promised?
Natalie Holt is editor of Money Marketing – follow her on Twitter here