Clouds lingering over FAMR conclusions

The whole approach has been much more ‘iterative’ – a word this columnist has certainly never used before to describe anything emanating from the Treasury or the regulator.

It also seems reasonably advice-focused – looking at both the demand and supply sides, complicated advice problems and, crucially, mentioning costs such as the Financial Services Compensation Scheme and the long-stop.

Yet investment advisers should still be cautious, because the review refers to advice in the general and not solely the regulatory sense.

There could be some clarification around a simpler type of advice – which remains advice in the regulatory sense – but you have to wonder if the review will actually pave the way for guidance that can lead to an outcome or at least a set of outcomes.

Treasury ministers demanding action will be keen to ensure regulation does not stand in the way of getting people to invest. They will also want to ensure the industry can meet any demand for help with retirement decisions.

Given this context, there is a risk that investment advisers lose (and are seen to lose) that role of getting people to invest, or at least to invest enough. It could be left to the algorithms.

The Financial Advice Market Review does not look or sound like an RDR-style juggernaut careering towards the advice sector.

Of course, helping people plan and preserve capital is now the core challenge for most advisers, but losing the role of persuading altogether would be a great shame.

Hopefully some advice firms will embrace whatever regime emerges from FAMR – whether it is guidance, advice or something in between – and reach beyond their core client bases. Otherwise there may be a risk that advisers’ interests, although politely included in much of the discussion, are ultimately ignored.

That brings me to the second related concern. Currently, the existing advice infrastructure is beset by thorny challenges surrounding the operation of the compensation scheme and – at best – a partially functioning professional indemnity market.

There could be movement on the long-stop, but the compensation scheme review is scheduled for after the FAMR is produced.

Investment advisers tend to survive when other distribution channels fail and thus represent an insurance policy of sorts. Consider how important advisers will be for the roll-out of auto-enrolment to micro employers, for instance.

Indeed, advisers could actually be best placed to develop sound and compliant solutions designed to spread the reach of investment, rather than comparison sites or other web-enabled platforms. A firm that has financial planning in its DNA may have the best approach to customers, while other players might fail with grim consequences.

But advisers shouldn’t assume the FAMR team necessarily sees things that way.

Perhaps advisers need to offer a quid pro quo yet. If it is made more cost effective to provide advice, will significant numbers of advisers commit to extending their services to lower-income clients or embrace the new channels? It is a question worth asking again.

John Lappin writes on industry issues at www.themoneydebate.co.uk