Perhaps the Financial Advice Market Review (FAMR) was never going to shift the tectonic plates underneath the feet of investment advisers. FAMR might have brought about a revolution; in reality I suspect it will represent an evolution instead.
That is quite significant because it is difficult to see anyone making significant alterations to their business plans as a result. Nor will new entrants to the market feel the need to come up with a brand new offering.
That will surely disappoint many people, though the winners here may be the execution-only platforms, who will receive direction on the boundaries between guidance and advice.
Much of FAMR has been passed to further working parties, though it is unkind to suggest the can has been kicked into the long grass. It is not that kind of referral.
Advisers can at least take comfort from the fact that they are not simply being ignored. We have a financial advice working party, and an advice unit to boot – though no doubt this will sit pretty close to the innovation unit and the ‘sandbox’ being developed at FCA Towers.
As touched upon, one of the most significant parts of the process is the working party’s look at guidance and advice. Will guidance inch closer to advice and if so, what exactly are the implications? But I don’t see anything too radical in the suggestion that advice be reframed as a personal recommendation. Wasn’t it ever thus?
You could see platitudes, but I read FAMR and see a big change of emphasis.In the midst of all this debate, it is also noteworthy that major providers such as LV=, and smaller players such as Saidso.co.uk, are already offering relatively inexpensive online advice. They are putting their brands behind that advice, too.
Maybe the market is outpacing the regulations. Indeed, I think financial planners such as Keith Churchouse and those such as LV=, which have the scars from years in the pensions business, may be just the sort of places from which innovative and, crucially, compliant client-centred solutions are emerging.
But there is one area of the review which I think is worth considering as a win, though only if advisers and their lobbying organisations seize the opportunity.
It was always difficult to envisage major reform of the structure of the Financial Services Compensation Scheme and the FOS in the very near future, but both organisations have been put on alert that at least some of their behaviour – relating to both fees and general decision making – will come under scrutiny.
Likewise, it is clear the FCA now has to pay heed to the sustainability of the current advice sector. You could read the series of recommendations and see platitudes, especially given the lack of long-stop reform. But I read it and see a big change in emphasis.
I see regulatory bodies coming under pressure to justify their charging, their rulings, and their overall approach. It strikes me as more important than the very loosely applied cost-benefit analyses of consultation papers of the past.
Much depends on how advisers react. Yet it is just possible that in years to come, this is seen as a watershed.
John Lappin writes on industry issues at www.themoneydebate.co.uk
