FCA under ‘political pressure’ to remove advice barriers

The regulator is under “political pressure” in the post-RDR world to ensure to removes barriers to mainstream financial advice models and is now keen to support innovation to establish a range of new and diverse intermediated solutions, according to regulatory consultancy Bovill.

Speaking at an event this morning (11 November) on advice models in the wake of the Retail Distribution Review, Bovill consultant Neil Walking said the regulator is keen to support innovation, “particularly if it involves technology... [and] if it involves new models of distribution”.

He said that the attitude of the regulator now is to work with the industry to overcome barriers that the adviser community perceive stop them from launching new services.

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Many have said the key issue is a lack of codification on the part of the regulator of what pensions minister Steve Webb called “cheap and cheerful” simplified advice models, which would offer protection against future claims.

Others have called for simplified systems that allow individuals not qualified to QCF level 4 to administer the service to save costs. Some, such as Personal Finance Society chief Keith Richards, have said new models could be very different to what is in the market now.

In July, the regulator published a 48-page guidance paper which clarified what defines ‘simplified advice’ and how restricted advisers could offer such services.

Mr Walking said political pressure was forcing the regulator to change its position from immediately post-RDR, when it broadly denied there was even an advice gap at all and maintained a stringent distinction between full advice and non-advised alternatives.

In particular the Treasury Select Committee has been vocal about the need to clarify what is and is not advice so that those operating simpler online models can act with certainty.

Mr Walking said: “On the non-advised model side I think the message that we were getting two or three years ago was more along the lines of: it’s very difficult for us to see how a firm could design a non-advised process that’s going to be attractive enough and provide a good enough user experience without it straying into advice.

“Frankly we should just accept that its going to be advice and get on with it.”

“On the simplified advice side... a couple of years back the message was all this stuff about the advice gap is really a myth; there isn’t any advice gap the market. This mass market for advice is very small because most of these people haven’t got any money anyway; they are all up to their necks in debt and there’s high potential for detriment.”

Mr Walking added the advice gap criticism is something that the FCA is keen to be seen taking seriously and that this is the key driver of its Project Innovate.

Christopher Woolard, FCA’s director of policy, said Project Innovate was launched as a result of the belief that product innovation is positive for consumers.