The FCA says its review into non-advised sales and simplified advice for investments is taking an “early look” at whether these models are delivering good outcomes for consumers.
Given that many firms have been operating non-advised models for years, the move is later than many advisers would have wished.
But with FCA chief executive Martin Wheatley recently telling MPs he anticipated seeing “web-based, entrepreneurial models delivering advice in a different form,” as a way of addressing the advice gap, it is important the regulator knows exactly what is going right and wrong with both non-advised and simplified advice.
This should include a close look at services that may blur the lines between the two. The review will shine a welcome light on the processes behind firms’ “best buy” product lists and investment research and any commercial arrangements between distributors and fund groups.
With many firms reluctant to launch simplified advice propositions due to a lack of direction from the regulator, the review will hopefully lead to some useful guidance about what is acceptable. Previous consultations on simplified advice have led to an impasse between firms and the regulator.
The FSA was concerned providers were pushing to water down rules to flog more products without appropriate consumer protections while the regulator was warned that simplified services were not viable without a reduction in regulatory burden.
Even in the past couple of years we have seen technology move forward significantly and now have a new regulator alive to concerns about an advice gap and out to prove it is in listening mode.
The FCA is also considering the non-advised annuity market as part of its currnet annuities review.
This week, the Financial Services Consumer Panel was the latest in a long line of observers to raise concerns about non-advised annuity services.
The decision to allow non-advised annuity services to continue to receive commission, after it was banned for advisers under the RDR, leaves the door open to behavioural biases that could hit consumers’ pockets.
The panel found opaque commission arrangements and huge variations in commission levels. Money Marketing has recently pressurised certain firms into removing claims about services being “free” but stronger rules are needed, including a commission ban.
Labour’s recently defeated proposal for all pension savers approaching retirement to be directed to independent annuity brokerages carries significant merit. But before this can happen the sector must be given a clean bill of health.