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Opportunity or threat? What advisers make of Govt advice review


Advisers, trade organisations and professional bodies say the Government’s advice review represents a once-in-a generation opportunity to help shape regulation.

But there are also fears among the profession that the review will mean duplication of effort with other ongoing inquiries or that the focus on advice could be sidelined.

The review, published this week, will be led by the Treasury and the FCA and will look at how the advice market can deliver better outcomes for consumers. Final proposals are expected ahead of next year’s Budget.

It will run alongside a Government probe into exit fees, a Work and Pensions committee inquiry into Pension Wise and pension freedoms advice, and work being carried out by the Money Advice Service after an independent report called for the organisation to be overhauled

The FCA says it plans to continue its own work analysing the implications of the RDR, but added resources have yet to be allocated. Any work would come after its collaboration with the Treasury.

Institute of Financial Planning chief executive Steve Gazzard says: “The difference is this is a strategic piece of work.

“Many of the other pieces are purely in reaction to some issues that have arisen, like the work on exit charges. Those are all operational points that have come out of pension freedoms because the reforms were implemented with limited or no consultation.

“I hope the interest will remain around the strategic issues in the advice market but fear the Government may end up focusing on the issues that are much easier to complain about.”

Personal Finance Society chief executive Keith Richards admits there is a risk of duplication and distraction from addressing the issues in the advice sector as a result of the sheer volume of work going through Westminster and Canary Wharf.

But Richards is still encouraged that the Government is showing commitment to improving advice.

He says: “In the past this sort of thing would have just been done by the regulator, so the involvement of the Treasury is quite significant.

“The fact the Treasury has chosen to publicly confirm it sees the need for an evolution of regulation is a further positive indicator that Government is concerned about its impact of regulation more broadly. In part that’s because of the importance of pension freedoms to this Government.”

Chase De Vere head of communications Patrick Connolly says many of the issues raised by the review have been common complaints among the advice profession.

He says: “There’s nothing new here. Everything that is to be analysed is well known, such as the lack of access to advice, and it’s difficult to see what the actions or conclusions that will be that can help to improve the situation.”

Trade body Libertatem chief executive Garry Heath says advisers must seize the opportunity to shape the regulatory agenda.

Heath says: “The only two things that would be bad for advisers is having a consultation and not taking part, or not having one at all.

“Some have already suggested this will be a stitch-up, but that will only be the case if advisers do nothing.

“So they can either sit there and wait for something to come along, or they can stop being hostages to fortune and start putting forward what they want to see out of this review.

“This is the best opportunity that advisers have had for 20 years and it isn’t going to be here for very long.”

Adviser views

Chris Williams, chief executive, Wealth Horizon

The most striking part of this review is it comes close to admitting the RDR created an advice gap. The FCA has tried to suggest that hasn’t been the case in the past so admitting there is a problem is an excellent first step.

If we can recognise advice is valuable and important, then that’s a step away from the execution-only services filling the advice gap.

Dennis Hall, managing director, Yellowtail Financial Planning

This is quite a wide-ranging “we are not saying anything” review at the moment. The fact a report is not due back until next year’s Budget means it’s not going to be as far-reaching as an RDR review. The Government will be looking for what quick wins it can get.

You have to wonder whether its related to the sacking of Martin Wheatley, and a move to bring some accountability to the regulator in whether consumers can access advice.


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. Burn it down to the very foundations !!

    Regulation needs to be rebuilt from the ground up, any half arsed attempts to re-jig the existing regime will end in failure….. period !

    The whole current system has and is failing, from the institutionalised prejudice, the cost, the rules, accountability etc etc etc

  2. I guess like many other people in the industry I just hope the government appoint people with financial services experience and understand the advice market as it stands now! Fingers crossed!

  3. According to the BBC this is negative as ‘Financial Advisers are under scrutiny’ whereas I see this as positive. I agree the involvement of the Treasury is welcome as it removes the sole involvement of the FCA who, whichever way you look at it, tends to be too narrow in its view and objectives and hence can make some issues worse.

    The advice gap is there (and RDR is party responsible) and if the Government & co can make the image of taking financial advice more positive, show examples of issues/risks/benefits and encourage more people to seek help then we all benefit – especially the public at large.

    The issue of costs of advice is huge and relates back to the rocketing costs of regulation – the elephant in the room. That means the source of the problem needs to be reviewed and that means FOC, FSCS and the FCA.

    Maybe if they actually asked people that actually sit down with clients, assess needs and give advice, and even clients who would not normally seek advice, instead of vested interest groups. Maybe then they might get somewhere with an outcome that meets the needs of the 21st Century.

  4. Me too Greg (no relation) – great opportunity This can go one of 2 ways:

    Either advisers can unite to use this opportunity to completely reform regulation. To ensure that Government policy flies in formation with the 3fs and the 3fs fly in formation with each other. All properly accountable to Parliament this avoiding some of the worse abuses of power we have seen of late.


    We fail to unite and in so doing create a self-fulfilling prophesy in which we will see the continued marginalisation of the sector and the slow destruction of the industry as represented by the status quo.

    Candidly we cannot wait till advisers scratch their collective bottoms and ponder for the next 18 months. We have work to do now.

    Advisers need to unite and be proactive; we have the wit, ability and lobbying power to bring about real change and to make progress but only if we unite, fund representation properly and individually take responsibility for our futures.

    So what is to be? Another stitch up by the powerful or advisers driving the agenda on behalf of their clients and themselves.

    Your choice – Join Libertatem today as get your voice back.

  5. Those carrying out the review, the FCA and the Treasury, will have to be open and honest about their own shortcomings, otherwise it just turns into another witch hunt with advisers being blamed for the lack of capacity, charges and anything else they can think of.

    I am at a loss to think of what further damage can be done to an already fragile industry, maybe they will actually recognise the value of advice not just in monetary terms.

  6. Regulation implies the monitoring of performance against agreed rules or performance standards.
    The FSA/FCA/FOS/FSCS and Treasury have never actually clearly set out what they believe “good” looks like but instead have always chosen to review with the benefit of hindsight against performance standards that are “fluid” in interpretation and as long as they “find” in the consumers favour can not be subject to press criticism.
    Financial Advisers by nature are naturally rebellious to a one size fits all approach to advice and don’t even get me started on the shortcomings of decision trees – my clients pay me for the 40+ years of knowledge and cynicism that I apply to assessing my research before I recommend a course of action.
    We have to acknowledge that the “regulators” are effectively trying to herd cats which will never be attained in my lifetime through committee lead rules.
    The amount of money wasted trying to get a small group of rogue advisory outlets to act with integrity towards their clients is awe inspiring.
    I suggest the Treasury follows the complaint trail and instead of allowing the “regulators” to tar all advice organisations with the same brush adopt the approach of going hunting for the rogues that take advantage of poor legislation (HMRC) and inconsistent Government Policy rushed through without consultation with the industry that has to interpret and assess the intent and accidentally intentions of it.

  7. Call me a cynic but whenever we see a review of advice we seem to see that it benefits the larger providers rather than small hardworking advisers who tend to do the right things by their clients.

    I suspect what will happen in this review is a considerable watering down of qualifications which will enable large suppliers to provide so-called simplified advice without really understanding the implications to the client.

    This will simply be bank assurance all over again but this time large platform providers providing limited advice to get the scale of assets under management. Vested interests are at the heart of this review, not client or adviser outcomes.

  8. “Advisers, trade organisations and professional bodies say the Government’s advice review represents a once-in-a generation opportunity to help shape regulation.”

    So what exactly were RDR and subsequently MMR (good or bad) all about?

  9. I think the big concern here is that the review is going to be carried out by consulting consumers and the regulators rather than also including an equally relevant third stakeholder – the advisers. Garry Heath has the right motives, but actually rather than us ganging together behind a lobbying body, what really needs to happen is that the review of the advice is designed in a way that enables the outcome to be informed by ALL stakeholders, including a wide variety of individual advisers. I do not want Garry Heath or anyone else to try and collectively represent us, because we are not a uniform body of people. There are different types of adviser and different types of consumer, so I don’t get why Libertatem or any other body can represent and communicate this to the review body effectively.

    If you ask a regulator about themselves they will look to defend where they are now and as a result will not be open and honest. If you ask consumers they will simply answer from their own personal point of view, and may well come up with a set of aims as follows:- low cost, simple easy to understand advice, minimal time and involvement in the process, transparency. But they will all have different views. If you ask advisers, we will respond completely differently based upon our own position in the advice community, based on our own clients circumstances and needs, and based on our perception of what is needed.
    So there will be a very wide variety of different views.
    If you ignore regulation and ignore the fact it is financial services we are looking at, then surely the conclusions would be:
    There are different types of consumer with differing needs – some want, value, need and can afford full holistic financial planning. A different group wants to buy off the internet with access to information about the product including features, benefits, terms, risks. A different group does not value or want full holistic planning but does not feel confident making their own choices. There is then the corporate client, possibly acting as a conduit for advice to their employees, which is a whole different dynamic.
    There are probably other types too, but I am simplifying. However, these three distinct individual types and the corporate client are indeed different and should be able to access different types of advice/service/guidance. There should be different levels of consumer protection afforded to consumers, with very clear warnings about what they are NOT getting if they do not pay for and receive full financial planning.
    There is then the issue of payment for advice/guidance/information. I find it laughable that unregulated products can still pay commission to “advisers” whereas regulated investment products cannot. It is a joke. With regard to lump sum investments adviser charging/direct fee invoicing works absolutely fine. For regular savings products it simply does not work, and it is the removal of the facility for the consumer to pay for advice on a pay as you go basis via factoring/commission that means a whole raft of consumers does not take financial advice. Whilst Auto Enrolment will partially fill and reduce the pension savings gap, there is nothing to encourage regular saving of a medium to long term nature in risk-based products. Much as they were criticised, the “Men from the Pru” (no sexism intended) at least got their customers to adopt a savings habit. If we regulate the design of products and also properly police how they are sold then there is no reason why clients should not be able to ask to pay for the advice by factoring or commission for regular savings plans. There is no doubt at all that consumers are very often better off paying fees rather than allowing providers to pay their bill and then charge them more over the long term via contract charges and early surrender penalties. Sadly however, this just means that younger people starting off their careers just won’t save in the right vehicles. They may not have the lump sum available to pay for the advice or have other needs for their savings. No-one disputes sensibly that those who have already saved money are better off paying fees upfront, but by removing the option for the customer to in effect take out a loan to pay for the advice it just removes advice from these aspiring savers. So they either don’t save or else use cash ISAs/deposit accounts and miss out on the benefits of taking risks. I find it disappointing that so many IFAs take a holier than thou approach as if the only way is full financial planning from an Independent Financial Adviser. In the idea world it might be. But there is a need for a much cheaper less comprehensive option. A sole trader does not want to pay for Ernst & Young partners to produce a set of accounts for them, and Marks & Spencer need more than a self-employed bookkeeper to meet their accounting needs. There is also need for regulators to understand that more and more information at point of sale IS NOT HELPFUL. The emphasis on documentation and justification, and the fear of the FOS adopting their own interpretation of what is reasonable in a retrospective fashion means that consumers receive a whole raft of meaningless illustrations, product key features documents, terms and conditions, suitability reports, long appendices, none of which do anything other than add cost and unnecessary complexity to the process.
    So cost, accessibility, simplicity, transparency, different scopes and levels of service are all issues which need addressing. I guess at least we get the chance to make responses as part of the view but don’t hold out much help that the right people will be analysing the information collected by the review.

  10. @Brian I wholeheartedly agree with you comment. For what it may be worth, perhaps we should all write to our MPs broadly welcoming the review but making the case for consideration of the points you raise. We might also question the current timescale – which in my opinion is far to short.

  11. When it states that the final proposals will be available before next year’s Budget, you get the feeling that the outcome is already known and this is window dressing. One size fits all, one price fits all, simple light touch regulation and more kudos for George, the Peoples Champion as he heads towards Number 10.

    As many have already said, what was the point of RDR if lowering standards along with price is the outcome?

    • Reading the terms of reference for the review it strikes me this isn’t a review of advice so much as a review of the regulator.

      Look at the scope description it is almost entirely about the regulatory and legal framework and the “interplay” between the regulatory framework for advice and FOS and FSCS.

      “the review will also look at the provision and effectiveness of advice…. to assess whether differences in regulatory requirements around advice lead to unintended consequences for consumers and firms”

      This is a review of RDR

  12. @Nick I hope it is a review of the regulator but also hope that it addresses the impact of RDR as part of that review. But I suspect Geoff Sharpe is right, the relatively short time scale of the review suggests they have the answers already and are just looking for some supporting evidence.

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