The review aims to ensure that consumers get the help they want, at the time they need?it, and at a cost that is affordable, to help them make informed financial decisions.??
The following key themes and insights have emerged from our early phase of this work, informed by engagement with industry and consumer groups, and which will guide the next phase of the review:
The solution to this challenge will not be met by changes to regulated advice alone. People’s needs are diverse and vary over their lifetime. We need firms to actively engage and provide flexible forms of support that can adapt to different types of financial decisions.
To provide more support to more people it will be necessary for firms and consumers to manage risk, rather than eliminate it. This is because risk is a key driver of cost to firms and ultimately to consumers which directly impacts on the availability of support.?
Any solution will rely on support being provided on a commercial basis. The review will need to focus on outcomes and design a regulatory system where commercially viable models of support can emerge.
This review should leverage the Consumer Duty, to set clear expectations for the support that firms provide their customers and ensure that consumer protection remains at the core of any future regime, and we will work closely with the Financial Ombudsman Service to do so.
Clarifying the boundary
While the review is ongoing, we have published clarification for firms who want to support consumers more, particularly during the increased cost of living, without providing a personal recommendation. This reflects what firms can currently do under the existing framework and does not represent any regulatory change or pre-empt any results from the review. The intention of the information is to help firms get closer to the current boundary so that consumers can benefit from support now, pending broader regulatory reform.
As part of this, we have set out clear examples of where a conversation with a consumer would not be classed as a personal recommendation. The examples include where a consumer asks about the difference between an Individual Savings Account (ISA) and pension, where a firm points a consumer to tools which can help them budget, or where a consumer who wants to take out an annuity has a partner.
We have also set out examples of good practice where we would expect firms to help consumers and comply with the Consumer Duty. This includes signalling the drawbacks of having too much cash that is not invested or outlining the risks of transferring a pension if valuable benefits may be lost.
Incorporating the Core Investment Advice regime into the Advice Guidance Boundary Review
In our Consumer Investments Strategy, published in September 2021, we set out our ambition to see a consumer investment market in which consumers can invest with confidence, understanding the risks they are taking and the regulatory protections provided. Whilst not wanting to restrict consumers’ ability to invest, we want them to be able to access and identify investments that suit their circumstances and attitude to risk. Key to this is ensuring that consumers can get the advice or support they need, only access higher risk investments knowingly, and are protected from scams.
In support of this ambition, in November 2022 we set out initial proposals for a Core Investment Advice regime, seeking to broaden access to narrower-scope financial advice. Since then, the wider review has been announced, with the potential for more substantial change.
Given the potential for more significant change that is now possible through the Advice Guidance Boundary Review and given the limited support from industry for the initial set of proposals consulted on, we have decided to roll the development of these proposals, taking onboard the feedback we received, into the broader review. This will allow us to support the more substantial changes that are being asked for and considered through the review. The consistent feedback from the consultation was that firms wanted the proposals to go further in terms of examining the boundary between advice and guidance – in rolling this work into the boundary review we will be able to consider and develop proposals for more significant reform.
The consultation feedback will help inform future developments, with the aim of developing broader and commercially viable propositions to broaden access to financial advice.
We will provide a further update in a policy paper that will be published in the autumn.
Sarah Pritchard, Executive Director, Markets at the FCA, said: 'It is vital that people get the help they need to make effective decisions – whether that be guidance or full financial advice from a qualified financial adviser. This is particularly so now, with the cost-of-living pressures. We want consumers to have greater confidence to invest, but to achieve that people need access to the right information to help them make decisions, understanding levels of risk. Our joint work with the Treasury in the months ahead will help to achieve that. In the meantime, and to see quicker improvements, we are taking steps now to give firms greater confidence to support consumers, pending broader reform, by clarifying the boundary of the current regime.'
Chris Hill, CEO of Hargreaves Lansdown and FCA Practitioner Panel member has said: 'Data and digital tools mean there is now a lot more we can do to nudge consumers to better investing behaviours. The clarity the FCA are bringing today on the advice boundary, and the commitment to review this, show that we can develop a new regime to ensure firms can do more to drive better consumer outcomes.'
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