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Viva la advice revolution: What Govt review means for advisers

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Advisers and providers are braced for a fundamental shake-up of the advice market following the Government’s announcement of a wide ranging review of the sector said to be on a par with the RDR.

The Financial Advice Market Review, announced earlier this month, has the overarching aim of establishing how the advice market can work better for consumers. It will also consider the impact of regulation on the affordability and availability of advice.

The implications of this work could see the lines between advice and non-advice redrawn, as well as providing a gateway to mass market advice for the banks and providers shut off from this market post-RDR.

It poses questions about how a more flexible advice market can work within the constraints of European regulation, and whether it is right to dilute rules around liabilities and qualifications in a bid to narrow the advice gap.

Industry experts say the review signals the Treasury’s intent to seize control of a situation that threatens to derail the success of its flagship pension freedom reforms. Money Marketing understands the review has been the subject of discussions at the highest levels of Government, and there are signs of a growing impatience with the FCA for failing to grasp the nettle on the advice gap.

So what would the review mean for advisers in practice? Is there something to be said for banks and insurers coming back into the advice space? And can this advice revolution deliver what firms have been craving for decades – a proportionate regulatory system that encourages, rather than destabilises, the advice profession?


The advice review has been launched jointly with the FCA, but it is clear it is the Government is driving this project.

It will be supported by an advisory panel led by Scottish Widows chair Nick Prettejohn and will cover products including pensions, annuities, savings, mortgages, and general insurance.

Initial work will be done over the summer with a consultation in the autumn. Final proposals are expected ahead of the 2016 Budget.

The Personal Finance Society was among the adviser representatives lobbying the Government for reform ahead of the review’s launch.

Chief executive Keith Richards says some have already christened this as “RDR Mark II”.

He says: “The RDR was all about protecting public interest and increasing transparency and professionalism. But what it didn’t do was actually tackle the thorny issues of an advice gap, exclusion from advice and how we rebuild the public confidence back into a savings culture. This review is the start of doing that.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “Pension freedoms have been the catalyst, and the Treasury has lost patience with the fact that people can’t get simple low cost support.

“As with the pension tax relief review, where pretty much everything is up for grabs, this advice review implies a fairly broad mindset and some fundamental principles could be changed. I was genuinely gob-smacked when I saw it.”

Apfa director general Chris Hannant says the cost of regulation is set to be at the heart of the trade body’s formal response to the review.

Hannant says among other issues, Apfa wants to see the Government tackle the level of FCA fees and Financial Services Compensation Scheme levies. It is also keen to see reporting requirements addressed and a different approach taken by the Financial Ombudsman Service.

Safe harbours

One proposal included in the advice review’s terms of reference is the creation of “safe harbours”, described by the Treasury as “a regulatory carve-out”.

Hannant says he expects such a move would see the Government and the FCA offer reassurance about liabilities for advisers working on certain classes of products, or meeting certain conduct guidelines.

He says: “When people talk about safe harbours, they mean that if you do something specific then you won’t get into trouble.

“That could take the form of safeguards in place if you are recommending certain approved products that are deemed to be suitable for most people.

“You could even offer some protection against the FOS in certain circumstances – that if you took certain prescribed actions that you would not be deemed to have done something wrong further down the track.”

Wealth Management Association director of regulation Ian Cornwall says it remains unclear how this will function in the context of broader European regulation like Mifid II.

Cornwall says: “We want to know how the safe harbours idea is possible given that we operate in a European framework.

“We do sense there is a desire to bring more flexibility into the advice market, and we are going in with an open mind, but it’s a question how some of these questions will fare within that.

“We are awaiting further dialogue to understand what those terms of reference might mean.”

Hannant suggests one way to sidestep this concern would be to offer less severe punishments under the safe harbour rules when an adviser makes a mistake, rather than scrapping penalties altogether.

He says: “There’s some leeway you could use on the consequences for people who are inside a safe harbour so that they might be treated in a different way if they end up in front of the FOS, for example.”

Return of the banks

The advice review also raises the prospect of revisiting the definition of advice, or in Government-speak, “proposals as to whether the regulatory perimeter for financial advice should be amended, taking into account European legislation.”

This has prompted suggestions that banks and providers could make an advice comeback.

Richards says: “There’s no question the Government recognises professional advice has been pushed further up the value chain because of the level of impact and cost that has been placed on it and they want to address that.

“They want to address that for all levels, but you can’t just address it for one group of consumers.

“So it’s likely we are going to see solutions that will enable large organisations, whether that be banks or insurance companies, to present the right solutions to give more simplified access to advice.”

The return of banks and providers to the advice space has prompted disquiet among some firms, raising concerns of “two-tier regulation”.

Aegon UK chief executive Adrian Grace argues any loosening of advice requirements could have severe unintended consequences.

He says: “We have to have the same standards across the board. Having set a new advice standard through RDR, I don’t think we can weaken that now because that is not the right thing to do.

“To think that banks or other financial bodies could have lesser standards for providing financial advice is fundamentally wrong.”

Grace adds: “We need to work out how to provide advice to middle England, but a lot of that can be done digitally and through guidance, in partnership with advisers.

“As soon as you start to weaken the regime, you open up a space for a whole series of cowboy tactics.”

But EY senior adviser Malcolm Kerr disputes this outcome as a foregone conclusion.

He says: “It may be that there’s a system that allows for more focused advice for people who just want an Isa, but I can’t imagine that the requirements for that would allow it to be any less well researched and executed than if it was through an adviser.

“I don’t subscribe to the view that there would be a reduction of quality, and I don’t think there will be any lower standards for banks and large organisations than advisers.”

Instead Kerr argues the prospect of banks giving advice could be a positive for consumers in the post-RDR era.

He says: “Institutions can invest in technology that would make the process more efficient and less open to mistakes being made, and that’s a good thing because more efficient might mean less expensive.”

Kerr adds for someone planning their retirement, working with a larger business may provide the reassurance that the firm will still be in place when they come to retire.

“The bottom line is a 55-year-old has 30 years of life expectancy, so those savers might take some comfort from knowing that the organisation looking after that money is still going to be there and in the same format.”

Crossing the Rubicon

Beyond the review itself, the way in which it was announced points to an increasingly aggressive Treasury seeking to stamp out any potential concerns around the rollout of pension freedoms.

McPhail says: “It really looks like we have crossed the Rubicon in terms of the Treasury taking control of the regulatory agenda.”

PR firm Hill & Knowlton financial services public affairs adviser Henry Groundes-Peace agrees, describing the advice review process as  “a timeline of intent”.

He says: “The Treasury is no longer waiting for the regulator to decide or evaluate for itself but is dictating terms.

“This level of activity presents considerable opportunity to those wanting to propose changes.

“The advice review has a worthy goal to bridge the advice gap. But it is up to external players to persuade the Treasury and the FCA on the changes they would like to see, not out of self-interest, but by demonstrating ways the consumer can benefit.”

Independent regulatory consultant Richard Hobbs is clear the launch of the review represents a significant intervention by Government.

He says: “If you are confident in your regulator you can have a fairly laissez-faire attitude, but you are unhappy or frustrated with it then you will tend to try and be more influential.

“The advice review is a clear example of Whitehall becoming frustrated with where the FCA is at. What it amounts to is taking policymaking away from the regulator, at least for the time being.”

EXPERT VIEW Keith Richards

There is evidence that recent reforms introduced by both the Government and the regulator have made significant improvements to the advice market, and there are plenty of advisers who would accept there has been a need for regulation in the past.

But once reforms have been put in place and there is clear evidence of improvement, there is a point at which we must see that level of regulation start to rebalance so the  profession can move on accordingly.

That is what we are starting to see from the Government- a recognition that the focus needs to be on public needs rather than protection.

It is likely we are going to see solutions that will enable large organisations, whether they are banks or insurance companies, to present the right solutions to give more simplified access to advice.From a broader sense, that is not a bad thing. We need more public engagement, we need better education and we need people back in a savings culture. Then you will see people stepping into different models appropriate to their needs.

But we have to be honest about this. A lot of advisers have built some very successful businesses over the years and would not necessarily want to diversify into offering more cost-efficient or lower cost entry solutions. Others of course will want to do just that.

All advisers have a role to play through the consultation process. But the key thing is for us to be professional and balanced in our solutions. What Government will not be interested in is a one-sided argument that is all about us. If it leads to better outcomes for the public then they will be all ears. We will be pushing against an open door as long as we take that approach.

Keith Richards is chief executive of the Personal Finance Society


Jonothan McColgan


Combined Financial Strategies

The problem that has instigated this review is the massive hikes in fees from the regulator. It will be interesting to see if the Treasury realises this is partly because of the amount of fine money going into general taxation, rather than being put back into the industry.

There’s an easy solution there, but I doubt it will be found because of the need for those revenues. Anything else would just be rearranging the deck chairs on the Titanic.


Aj Somal

Chartered financial planner

Aurora Financial Planning

Hopefully this could bring a sea change. Right now the way things are going with rising regulatory costs it is becoming increasingly unviable to advice certain types of clients.

There needs to be more holistic thinking in order to avoid a market where fewer advisers are chasing more and more high-net-worth clients.

The road to revolution

December 2012: RDR comes into effect

March 2014: Chancellor George Osborne drops his Budget bombshell allowing over 55s access to their pension backed by “free, impartial, face-to-face advice”

March 2015: The Pension Wise guidance services begins taking bookings through The Pensions Advisory Service and Citizens Advice.

April 2015: Rollout of pension freedoms

June 2015: Osborne announces review into “excessive” exit fees, and floats the introduction of a cost cap
July 2015: Work and Pensions select committee launches probe into affordability and accessibility of financial advice

August 2015: Treasury and FCA unveil Financial Advice Market Review.



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There are 13 comments at the moment, we would love to hear your opinion too.

  1. ‘Hannant suggests one way to sidestep this concern would be to offer less severe punishments under the safe harbour rules when an adviser makes a mistake, rather than scrapping penalties altogether.

    He says: “There’s some leeway you could use on the consequences for people who are inside a safe harbour so that they might be treated in a different way if they end up in front of the FOS, for example.” ……’

    Glad this fella doesn’t have my back (or my subs)!

  2. For many advisers it may be necessary to deal with a greater number of clients just to fund the fee increases, so they will welcome a more streamlined process. As regards the banks, could this be a trade off for all the fines they pay to the Treasury, which is effectively another form of taxation?

    Personally, I prefer to deal with clients that cannot be served by advisers with lower levels of experience and qualifications, and I do not have the time to accept low ticket basic advice clients. I am sure I am not alone, hence the need for the Government initiative to fill the advice gap,but it will not be me filling it.

  3. Rt Hon Sir Arthur Streeb-Greebling 21st August 2015 at 9:57 am

    We won’t be in ‘Europe’ after next October so why bother with ths Eurononsence? There will be a landslide to get out.

  4. This is obviously a pre decided review for the benefit of the banks. Isn’t Nick Prettejohn a banker?

  5. On the one hand, we have the FCA’s maniacally unyielding obsession with endlessly embellishing and refining an advice framework designed to deliver comprehensively perfect outcomes for every conceivable situation, allied to advisers’ fears of the consequences of being judged after the event not to have crossed every conceivable t and dotted every conceivable i. This fuels today’s culture of claim-for-gain, enthusiastically egged on by CMC’s and supported by the FOS which, anecdotally, appears commonly to be biased against advisers’ recorded version of events. All complainants have to do is play the I’m just a simple man, I didn’t understand what I was doing, I was completely befuddled by the 50 page SR card and, as often as not, the FOS will declare Quite so, complaint upheld.

    On the other is the practical reality that operating within such a system is hugely expensive and most advisers aren’t prepared to embroil themselves in anything likely to come back at a later date and bite them on the backside, at least not at a price acceptable to many consumers who simply have no comprehension of why something which, to them, seems as though it should be quite straightforward is anything but. I just want to extract my TFC entitlement ~ what’s the problem? The problem, Mr Client, is that if I facilitate what you want without determining whether or not it’s actually the right thing for you to do and you have second thoughts about it in a few years time, you’ll be looking for someone to blame, namely me. I’ll sign a waiver if you want. That might be okay if there was any likelihood of the FOS accepting it as any sort of defence on my part. Sorry ~ it’s £500 or nothing.

    What solution can the government impose to resolve this impasse that won’t involve a drastic change of regulatory culture by taking an axe to great swathes of the FCA’s book of rules? For a start, we need a regulator of the regulator that will impose adherence to the Statutory Code of Practice for Regulators, with meaningful sanctions for non-compliance. Isn’t it obvious?

  6. Until regulation reengages with the reality that Financial Advisers are not Public Servants but people who have commitments and liabilities which they have to generate an income to satisfy, nothing will change.

  7. “It will be supported by an advisory panel led by Scottish Widows chair Nick Prettejohn” When I add up the hours my staff spend trying to get information out of providers then it is quite easy to see where one of the main costs is. Providers need to provide better support to advisers and according to my timesheets, Scottish Widows are the worst. Mr Prettejohn is hardly an independent chair. 25 working days to produce an illustration required to justify advice is unacceptable. And then it is wrong, you cannot speak to someone to make it clear what you actually wanted, wait another 25 days, blow another fuse and 75 days later get what you want.
    (there are some good ones and I take my hat off to them but SW and Zurich should do better)

  8. You know me, I love a good revolution to return some dignity and human rights, to those who have been en-slaved for to long.

    If you put aside all the jostling for position and bravado (from some quarters) for a moment ! (there will be plenty of that to comment on in the future).

    The very one thing that needs to be addressed first and foremost is the immunity of the regulator……..this has no place in a free society such as ours, they need to be made accountable to the people they regulate, they need to be accountable to the consumer. Their ability to set their own budget, rules and charge people as guilty till proven innocent, via a s166 and other means at their disposal, needs to be withdrawn with immediate effect !

    There has to be some form of due process, dare I say a regulator to regulate the regulator ! (God have I gone mad ?) then and only then will we see a change in costs, reporting, micro management and (yes) advice ! until this day, yes we may be thrown a bone every now and again, but by and large it will be business as usual for those at Canary Wharf and (you have to say) the treasury.

    Advice, professionalism, higher education standards, and transparency are all red herrings…. FSMA’s & RDR’s trojan horse (if you will) ? It is and always will be about the peripherals rather than those at the eye of the storm the clients and those closest to them !

    “Revolution doesn’t fall from a tree like a ripe apple….. you have to make it fall !”

  9. It amazes me that the the FCA admits “advice market is in a better place than before, being more transparent and professional than ever”. However the costs of providing this better place has never been so high. The better we are the more we have to pay? Makes no sense whatsoever in my tiny simple brain

  10. Julian and DH – absolutely agree but we must also have the ability to challenge FOS rulings through the courts. If clients can do it, so should we and the law should be written so that we sue the FOS not the client.

    I imagine that a few humiliating slap-downs from judges will soon mean that FOS decisions fall in line with English Law and not make it up as we go law.

    • Right there, Soren…… is the past, present, and the future !

      The current system precludes (by and large) us from any human rights, English law or common law whatsoever.

      All this talk of RDR II, we will be lobbying against the unreasonable costs and “its our turn to have our say” is Bollocks (I think that’s the technical term)…….. IMHO the vast majority of “industry” comments will be propergander looking to secure their own future, personal and professional.

      Its not until you force accountability on the FCA, FOS, FSCS etc etc etc , and take away its immunity will you then have some leverage for change !

  11. Soren Lorenson ~ What is needed is an impartial, independent body with unassailable powers to challenge and, if necessary, overrule everything and anything done or proposed by the FCA, the FOS and/or the FSCS. You no like Mr FCA? Tough shit. Just get on and do it and, if you don’t, you personally will be fined and sanctioned.

  12. Ive been in the industry 25 yrs and when i started out as a man from the pru, there was no or very little advice gap. Yes the products sold were either expensive or offered no or little returns but thats what you get with a door to door service but it helped people create a savings habit, getting rid of the home service part started creating the advice gap , RDR ultimately increased the GAP but the blame lies at the regulator as they are out of touch now with our sector and were out of touch before

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