The FCA has published the findings from its review into the effectiveness of the Financial Advice Market Review (FAMR) and the Retail Distribution Review (RDR). This was launched back in May 2019 and its findings will now be looked at alongside the FCA’s ongoing Call for Input on the Consumer Investments Market, which closes on 15 December. The FCA reports positive developments in the advice market, with improvements in customer satisfaction and some signs of innovation, but also accepts the need for more people to have access to support, with specific mention of too many people holding too much in cash.
Steven Cameron, Pensions Director at Aegon comments: “It’s positive to see the FCA reporting on improvements in the advice market and in customer satisfaction in its evaluation of the impact of the FAMR and RDR. However, few advisers will be surprised at the headline finding, which is that not enough people are getting the support they need. While 2012’s RDR succeeded in raising professional standards across the advice industry, stopped commission and any suggestion of associated ‘product bias’ and made the cost of advice completely transparent, it is also widely credited with making the advice gap bigger. Despite FAMR’s attempts to address this, the advice gap, and alongside it a guidance gap, is still very much alive and kicking and has arguably got worse since the effectiveness review was launched in May 2019. Since then, Professional Indemnity Insurance issues have got worse, FSCS levies have risen further and the supply of advice on transfers from defined benefit schemes has fallen ever further behind demand.
“The FCA had already given early insight into emerging themes and has pre-empted some of these in its latest Call for Input into the Consumer Investments Market. We welcome the focus on simpler forms of advice and more tailored guidance sitting alongside full holistic advice. Particularly following the financial challenges many people face with COVID-19, we can’t afford another 8 years of a steadily increasing advice and guidance gap. We urge the FCA to further strengthen the market for advice, opening up simpler models, while rewarding the vast majority of highly professional firms by turning the tide on escalating fees and levies. Alongside this, we hope the FCA will take the opportunity once the UK leaves the EU to be bold in terms of new types of support firms can offer under lower cost tailored guidance, including to the millions who are starting their pension accumulation journey in workplace schemes.
“As the FCA alludes to, one of the few upsides of 2020 has been a shake-up of the way many of us work and the realisation that a great deal can be done virtually rather than face-to-face. Advisers have been quick to adopt video conferencing and other remote working tools. Longer term, a combination of virtual meetings and other software developments that remove administration for advisers could make it possible to service more clients, helping reduce the advice and guidance gaps. However, this is a long-term trend and the practicalities of attracting new clients online rather than face-to-face is still work in progress. We’re pleased to see that as part of its future focus, the FCA will be looking at the growing importance of technology and innovation and how its regulatory regime can support this.”
*https://www.fca.org.uk/publication/corporate/evaluation-of-the-impact-of-the-rdr-and-famr.pdf
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