OpinionApr 27 2016

FAMR: supporters, doubters and shouters

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FAMR: supporters, doubters and shouters
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Reaction to the Financial Advice Market Review (FAMR) has fallen into three broad camps.

1. Those welcoming it as an important step in the right direction

2. Those slamming it for not actually delivering anything of much substance and calling for further consultations

3. Those (within the advice community) raging against the fact that it does little to help the financial advice community.

At Iress, we fall into the first category of firms welcoming FAMR as an important step. And here’s why.

The main value of FAMR is in the positive signals it has already sent to the industry in terms of addressing financial support services and access the mass-market is currently missing.

I think we’re already beginning to see the “green light” effect

Rather than setting a negative tone FAMR seems to want to help all players in the market understand what they can do and actively encourage the industry to develop new and better ways of working - to the ultimate benefit of consumers.

The RDR turned into a bit of a restrictive rules based “red light” whereas the FAMR seems more of a “green light” in encouraging innovation.

While FAMR might be a bit short on substance at the moment, I think we’re already beginning to see the “green light” effect with many big players planning to re-enter the market with new and different offerings.

What is also encouraging, is this won’t be to the detriment of current market players but will mean opening up sectors of the market that RDR effectively closed.

Additionally, the jeopardy is just too high to rush into any firm decisions without properly engaging with all interested parties first and weighing up the pros and cons of a range of approaches. That’s going to take some time and it needs to.

The mass market audience that FAMR is attempting to find solutions for has very different needs. They are old and young, rich and poor, digitally savvy and technophobic. They are financially literate and completely disinterested in money matters.

Some would engage with ‘advice’ if only they could afford it and some would never go near a financial adviser. In short - there is no one-size-fits-all solution that would work to address such a disparate audience.

What we’re talking about here is the foundation for mass-market financial solutions that will have an impact for generations to come. A quick solution is not what’s required here. We need a good solution - or as we will probably come to discover - a range of good solutions.

So we welcome the various recommendations to consult further, in a way that will engage key parts of the industry, from the regulator, existing providers, banks and advisers to consumer bodies and start-up fintech businesses.

As a leading global technology company servicing the financial industry, Iress is acutely aware of the benefits innovative technology can deliver to better engage people in managing their money. It’s really encouraging the FCA is focussing on technology as a key engagement method.

We look forward to playing an active part in the further consultations and in the innovation that will undoubtedly follow.

If the consultations lead to an environment where more people feel able to access affordable financial support, guidance and advice in a way they find convenient and compelling, everyone will benefit.

We will be part of a market that encourages innovation. We’ll be in a market that communicates openly and transparently. We’ll be in a market that provides affordable levels of financial assistance. We’ll be in market that consumers feel ‘connected’ with like never before.

We’re also confident that the professional financial advice community will benefit greatly from an increased ‘trickle-up’ consumer engagement effect over time. More and more people will take their first tentative step on the financial engagement ladder.

A lot of them will keep climbing that ladder as they come to understand the benefits. And not too many rungs up that ladder, they’ll be knocking at the door of their local financial adviser for professional advice.

This is the best opportunity the industry has had in many years to demonstrate its trustworthiness. Those arguing for quick fixes aren’t seeing the big picture here.

That feels like something worth getting right. It feels like something worth waiting for.

Chris Pitt is head of market analysis at Iress

Like this? On Thursday 28 April FTAdviser’s specialist Guide to FAMR will be live. It will qualify for 60m worth of structured CPD. Watch out for the Guide on the website and via your emails.