- The FCA and Treasury have set out three proposals designed to tackle the UK’s ‘help gap’ (dp23-5.pdf (fca.org.uk))
- The reforms under consideration are:
- Providing further clarification on the advice guidance boundary
- Creating a new ‘targeted support’ framework to support more personalised guidance
- Developing a lower-cost ‘simplified advice’ regime
- The discussion paper marks an important step in efforts to help millions of Brits make better-informed financial decisions
- AJ Bell is a member of an industry working group convened by FCA and Treasury to help shape the reforms
Tom Selby, director of policy at AJ Bell, comments:
“Ensuring Brits are able to access the help and support they need, either through regulated advice or guidance, is critical to building financial resilience in the UK. The existing regulatory framework makes it difficult for firms to offer anything beyond relatively basic information to customers without risking straying over the boundary from guidance to advice.
“Furthermore, the cost of providing regulated advice – in part due to regulation – means many people who could potentially benefit from advice do not receive it.
“The FCA and Treasury deserve credit for tackling this difficult problem head-on and exploring solutions to both improve guidance and make advice more accessible.
“Consumer Duty, which requires regulated firms to work to ensure customers achieve ‘good outcomes’, provides an ideal platform to initiate the step-change in approach needed here. Creating a simpler, more defined guidance regime has the potential to give firms the necessary confidence to deliver more useful, personal communications with the aim of achieving good outcomes for consumers.
“The measures proposed under the ‘targeted support’ plan could allow firms to give people much more help to make informed financial decisions. This has the potential to be a gamechanger, saving consumers time and money and leading them to a better financial outcome. Some of the examples cited by the FCA - like alerting consumers to the danger they may be under-saving for retirement or making people aware that they’re holding an unnecessarily expensive tracker fund – illustrate how people could benefit from their provider pointing them in the right direction, without advising them on exactly what to do.
“We also hope that, over time, any mandatory, generic communications that are proven to offer little value to customers can be removed and vague information made more relevant and helpful.
“While AJ Bell is a champion of the advice sector, the central challenge to ‘simplified advice’ is price and cost. A ‘Field of Dreams’ “if we build it, they will come” approach is not guaranteed to work. Ultimately, advice firms will need to be convinced lower-cost advice can be delivered in a way that is both useful to clients and profitable. Whatever the outcome of these proposals, full financial advice will remain the gold standard and anyone with complex financial affairs is likely to find their needs are best met through face-to-face advice.”
Types of support that could be offered under targeted support:
