In its response to the joint HM Treasury and FCA Review into the Financial Advice Market (FAMR), the Association of Professional Financial Advisers (APFA) is calling for reform of the compensation system.
APFA’s proposals, which believes in reducing the cost of financial advice will mean more consumers can afford it, includes the introduction of a longstop, reform of the FSCS levies and an independent appeal for the Financial Ombudsman Service (FOS).
APFA also advocates changes in the regulatory framework to enable the development of cheaper advice models that can cater for a wider audience. This would involve the creation of simplified advice with a ‘safe harbour’ for a set of basic and safe products.
APFA also urges advisers to respond to the review too.
Chris Hannant, Director General of APFA, says: “The cumulative effect of the cost of compensation, FSCS levies, professional indemnity insurance, together with regulatory fees and complexity of regulation has made financial advice expensive and the prerogative of the wealthy. These have been a drag on firms investing in greater capacity, expanding and innovating.
“It is basic economics – reduce the price of something, more people will buy. Therefore addressing the issues of FSCS levies, FOS and the longstop will significantly extend the availability of financial advice to a wider market. However, there needs to be further change to make it easier for people to get help in buying basic savings products. It shouldn’t be as hard as it is. Therefore, we believe there should be a simpler way to ensure people can be sold certain safer products as they will be suitable for almost anyone.
“Firms will need more confidence in how they will be treated at FOS. I believe this can be addressed by providing a properly independent appeals process that is independent of FOS. Advisers can make a difference – I would urge all advisers to think about what needs to change and respond to the review. We’ll be sending material to members to help them respond, but it is important that you tell them about the things that affect your business.”
