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The FCA’s 24 questions to advisers on RDR and FAMR

Question marks-confusion-puzzleThe regulator has today documented its concerns for the advice industry and outlined its long-awaited call for input to assess the effectiveness of its most significant rules and regulations.

Reviews of the Retail Distribution Review and the Financial Advice Market Review will be conducted jointly with the Treasury and under the FCA’s appeal to investigate ongoing concerns in the advice market.

The call for input will consider whether the initiatives for customer protection and best practice outlined by the RDR and FAMR have been successful in achieving their initial objectives.

Twenty-four questions relating to the effective functioning of the industry (included below) have been presented.

The FCA says: “Consumers can struggle to assess the cost of advice and may overpay for services which they do not need. We have some concerns that, in particular parts of the industry, there may be problems with conflicts of interest, poor treatment of consumers and misleading or conducing communications.

“The market is dynamic and has evolved considerably since initiatives were introduced. We will therefore assess the market to consider whether it is meeting consumer needs now and will do so in the future.”

The regulator published its first post-implementation review of the RDR five years ago, concluding there was proof that advisers were actively raising their levels of qualification and that product bias and charges had been reduced.

The implementation also found that quality of advice had improved but cost of advice, and subsequently the advice gap, had risen considerably.

The FAMR’s initial review came in 2016 and included 28 recommendations for the FCA and the Treasury.

It was met with mixed reviews by the industry, with many stating it had failed to directly identify the industry’s grittiest issues.

Aegon pensions director Steven Cameron says: “There has been disappointingly little practical change and no real sign of the advice gap reducing. The emphasis now needs to return to facilitating more people receiving advice.

“FAMR recommendations were also designed to make advice more accessible through the workplace, however employers continue to struggle to understand what they can and can’t offer without crossing into regulated advice.”

The regulator now says its specific focus for the full review of the market will be to reassess consumers wants, and to decipher upcoming market trends that could affect “future development of advice and guidance services.”

The future of robo-advice is highlighted in the questions, with the FCA asking for views on whether current regulation supports its development and whether it can be improved.

FCA executive director of strategy and competition Christopher Woolard says: “The aim of the RDR and FAMR was to help the market develop the right advice or guidance service consumers need to make those directions.

“It’s important that our work looks ahead to see how we ensure that this important sector works well in the future.”

The call for input is open for feedback until 3 June and a final report on findings is expected later this year.

The FCA says: “Over the course of 2019, we will conduct research with the industry and consumers to gather data to inform our work.

“If we identify problems in the market, or ways to improve advice or guidance services, we will consider how best to intervene.”

The FCA’s questions

Is there any other evidence we should consider in our
review of the RDR and FAMR outcomes and indicators listed?

How do different groups of consumers access
appropriate advice and guidance? Does this vary by
financial need or consumer group?

Are there any barriers to consumers accessing advice or
guidance that meets their needs or to firms providing

Do consumers have the right information to compare
advice and guidance services and to shop around? How
easy is it for them to compare services?

What barriers exist to making advice or guidance
services more affordable?

Do advice and guidance services offer sufficient quality
and choice to meet the needs of different consumer
groups? Are any consumer groups underserved?

Do consumers have confidence and trust in advice and
guidance services and do these services address their

Do consumers who take advice or use guidance services
get better outcomes than those who do not? If so, how,
and if not, why not?

What are the key advice and guidance services offered in
the market and do they meet the needs of all consumer

What new business models are being developed and how
will they meet consumer needs?

What aspects of advice and guidance services do
consumers value and why? Does it vary by consumer
group or financial need?

What emphasis do consumers place on the cost of
advice and guidance, against other elements of value for

Are there any barriers to effective competition between
firms offering advice or guidance?

Are the rules and guidance around advice and guidance
working well?

Are there points where the regulatory system may drive
too many people to seek advice?

Does regulation support the development of advice and
guidance services, including automated advice services,
that work well for firms and consumers? How can it be

Did FAMR or the RDR result in unintended consequences
that have caused consumer harm?

How have consumer needs for advice and guidance
services changed since the RDR and FAMR initiatives
were introduced?

Are there any new or emerging trends (for example, the
ageing population and increased pension flexibility) that
will lead to further changes in consumer demand for
advice and guidance services?

What changes to the market might be needed to
encourage consumer interaction with, and good
outcomes from, advice and guidance services in the

What market developments have taken place since the
RDR and FAMR reviews? What impact have these had on
consumers, the market and competition?

What future market trends do you expect to see and
what do you expect their effects will be?

What opportunities and barriers are there for developing
advice and guidance services in the future?

What emerging risks to consumers do you see in the



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. There needs to be more clarity regarding what is actually meant by Pension Transfer’ business.

    IFA’s should all be asked to take on advising at least one client per month with investible assets of less than £100k so that as many people as possible have access to good face to face advice. The Advice fee should be limited to £500 with a maximum ongoing charge of say £500 pa up to £100k of assets and then 0.5%.

    Fee only is not suitable, IMHO, for Clients with less than say £500k. Conversations become stilted because of hourly charges and therefore the flow of good information does not happen readily.

    I, personally, gave the FCA full details a few years ago of an IFA that owned a DFM and pushed every client that way, not to mention the abuse of client information access. The FCA chose not to proceed with anything.

    • “I, personally, gave the FCA full details a few years ago of an IFA that owned a DFM and pushed every client that way, not to mention the abuse of client information access.”

      Not sure what the point is here? If the DFM is owned by the IFA then it’s effectively in-house even if it’s housed in a separate entity. Providing the client is aware of the arrangement there is no issue. After all, they could have given advice in-house instead and the only difference is whether the client gets involved in the investment decision-making. Perhaps that’s what the FCA found when they looked… Of course, if this was hidden from the client then it’s a different matter.

  2. One of the objectives of RDR was to avoid cross subsidy, every client pays their way. If you factor in the base cost per client in terms of regulation, PI cover, compensation levies, staff, office and compliance costs, I suspect there is little change out of £1000 so I can imagine that many firms have to have a minimum fee.

    In reality you will service smaller clients, usually related to other clients,so cross subsidy is a viable solution, otherwise we turn them away and the ” advice gap” gets bigger.

    As advisers we do not see this shortage of capacity, we are more than willing to take on clients, but have to remain profitable otherwise there will not be many of us around in the future, leading consumers to large mass market providers. Perhaps that is the hidden agenda.

    The FCA questions are valid, but they have the answers to many of them without asking. Human nature tells you that guidance can leave doubt in consumers’ minds, advice does not, but it will cost to receive it.

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