A new ‘Advice Unit’ within the Financial Conduct Authority focusing on the development of automated or ‘robo-advice will be open for business from May, while work on the Financial Services Compensation Scheme funding review is also beginning.
Speaking at the Westminster and City industry forum on the Financial Advice Market Review last week, the regulator’s acting chief executive Tracey McDermott made several announcements about regulatory developments.
Laying out the various consultations and target dates for action from the FAMR’s final report and recommendations on how to narrow the gap between those who could benefit from advice and those who can afford it, she said the FCA does not want to wait 12 months before any progress is made.
“That’s why I can announce now that the Advice Unit will be open for business from May,” Ms McDermott said, adding it will be open to firms of all sizes, linking up with existing work on the use of technology in financial services, Project Innovate.
“We will initially be giving eligible firms feedback on how their advice models can meet regulatory requirements and expectations,” she said.
Later this year, the FCA will also be developing a set of tools and resources to be publicly available for all firms. This might include a set of standardised testing scenarios for firms to use to gauge the effectiveness of their models, she added.
“Once we have taken a few firms through the Unit, we will share with the rest of the industry the lessons we, and firms have learned from these experiences. We will set out more details in a statement in May, at which point firms will be able to approach us to seek support.”
Ms McDermott also confirmed work has also started on the long-awaited FSCS funding review, as the FAMR recognised many advisers saw the costs of its levy as a potential barrier to providing affordable advice.
“To address this, FAMR recommended that the FCA’s review of FSCS funding consider how to make the FSCS levy more predictable for advisers, and consider whether it is possible to design a levy that better reflects what is driving costs for the scheme,” she explained.
Options for this could include: |
Reforming the FSCS funding classes to better distribute the levy among members of the intermediation funding classes; |
Utilising the credit facility available to the FSCS to better spread payments, and; |
Introducing a risk-based levy to reflect the risk a firm poses to the FSCS. |
The FCA will be engaging with advisers on these options over the summer, both through bilateral meetings and an industry working group. It will then aim to follow with a consultation in the autumn.
Alan Solomons, director of London-based Alpha Investments and Financial Planning, said pointed out that in terms of robo-advice, clients understanding is varied.
“Some will cope and get the right answers for themselves, but many will not use anything and think they know best, others will use robo advice and misunderstand what they have read and what they have to do.
“The public also require a much greater understanding of investments and economics and personal finance. This needs to be taught in schools as a key part of the curriculum as we move towards people living longer and having to manage their finances in an ever lengthening retirement.”
peter.walker@ft.com
