Why it is time for advisers to get radical

Emma Ann Hughes

Emma Ann Hughes

Why aren’t you shouting from the rooftops about your preference out of the many options for the future regulation of advice that were put forward in the input paper published on Monday?

I am starting to wonder if you are so used to protesting against restrictive red tape that you have been totally dumbfounded by the FCA and HM Treasury presenting a menu of options for how you could operate and asking you to select what you prefer.

According to the input paper the Financial Advice Market Review will consider a single longstop or introduce varied limitation periods linked to the terms of products.

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For example, differential time limits that reflect the nature of products or advice, so that liability extends for a longer period when it relates to longer-term products.

Enhanced professional indemnity insurance and a compensation fund that would pay out in the event of a justified claim older than 15 years against an individual firm are also being considered.

This review is radical not because it is debating a long stop (that happened before in 2006) or because it recognises regulation has put advisers off helping the masses, but because it is the first that I can think of where the proposals being put forward may make life easier for you.

Rather than adding requirements to sit extra exams, insisting you hand out more paperwork when you are making a recommendation than you did in the past or forcing you to spend extra time debating with clients how you should be paid this review is asking you ‘What have we done that has put you off advising the masses?’

Heck, it is even considering whether there needs to be subsidies for advice. Options on the table for mending the advice gap include sharing the costs of advice with employers, or subsidising the cost.

The review may consider whether the government could work with industry and employers to enhance awareness through methods such as sign-posting or public information campaigns.

Another option being considered is whether any ‘safe harbours’ may be appropriate for financial advice, and whether they would be possible, given, amongst other things, the constraints of European Union law.

By safe harbour, the regulator stated it means a provision which reduces or eliminates uncertainty and potential liability in certain circumstances or if certain conditions are met.

All of these options suggest the powers that be have finally realised that without advice many people are making a mess of their finances.

Advisers need to be more engaged with this review than they were even with the Retail Distribution Review – it is potentially the biggest game changer we have seen in decades.

To me, the sheer number of options on the table for limiting advice liability in the input paper for the Financial Advice Market Review suggests something could finally happen to mean when you wish to retire you don’t have to worry about a claim for a recommendation you made decades ago.