The FCA has launched a review of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR) reviewing their impact on the market to date, and assessing how the market may develop in the future.
The FCA writes that its focus will be on how consumers engage in the market and whether the industry delivers what consumers want and need. “We also want to assess future trends that may have an impact on the future need and availability of services to consumers”, the FCA says.
Commenting on the call for input, LEBC Group’s Director of Public Policy, Kay Ingram (pictured) said: “The key focus of the FCA review is around the success of the advice sector and the regulator in improving training and qualifications, removing conflicts of interest between advisers and consumer, better treatment of consumers, clearer communications and transparency around the cost of advice. It is encouraging that the FCA has acknowledged the progress made since RDR in these areas.
“The FAMR also looked at the structure and cost of funding which the Financial Ombudsman Service set up to help consumers pursue complaints, and furthermore the Financial Services Compensation Scheme, which provides redress to those customers of firms which fail.
“We believe there is more work to be done in this area to ensure that the availability of the FSCS safety net is not abused by firms which set out to recklessly pursue short-term profits, but then fold and leave their liabilities with compliant firms. Picking up the bill for the reckless or fraudulent behaviour of others is a tax on advice and increases the cost to consumers; this aspect of cost of advice needs to be addressed too.”
Additional comment came from Tom McPhail, head of policy at Hargreaves Lansdown, who said: “Most of the time most people just want a bit of help and guidance. There’s plenty of evidence that access to the right guidance and reassurance can transform people’s confidence, their engagement and their attitudes to investing; ultimately it can make a significant positive impact on their financial futures.
“The availability and the certainty around the quality of guidance hasn’t been adequately addressed yet. Too often firms are still wary of crossing the boundary into inadvertently giving advice and as a result they stop short of giving the guidance their customers seek. The review announced today looks well placed to gather evidence on how to build on the success of existing reforms, and extend consumer access to advice and guidance while maintaining high levels of consumer protection.
“The nature of financial advice is also changing, with a trend away from the old model of a recurring relationship with regular fees, towards a more transactional approach, where people buy advice to address specific issues, as and when they need to.”
