OpinionNov 5 2015

FAMR assumptions imply more market intervention

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There are still some vitally important basic principles underlying the financial advice market review to which I would like to draw to your attention.

I have previously touched briefly on my disappointment that it fails to refer to ‘advice’ in its true regulatory sense.

This is particularly important given the high price regulated advisers pay for the privilege of being able to provide regulated advice.

Using the more readily understood terms of ‘advice’, ‘guidance’ and ‘information’ would, I believe, have been far clearer for respondents to the ‘call for input’. The consultation paper shows a more complex transition from personalised advice through to generic or non-personalised.

It should also be noted, however, that the Treasury has issued an additional consultation paper specifically on Public Financial Guidance to be considered alongside the FAMR paper.

I would like to highlight two further basic, but very questionable, assumptions made in FAMR which are presented as statements of fact.

The first is the “increasing complexity in financial services products and how they are described”. If this is true, then it is a damning verdict on the past 30 years of financial regulation and the quite literally billions and billions of pounds that have been spent (or wasted) by all concerned.

The second statement is the ‘increasing choice of products, product features and distribution methods’. Again, compared to the complexities of products and the many varied and confusing methods of distribution we have had for most of the past 40 years, this statement is simply not true.

I wholeheartedly support the review’s stated aim of increasing access to financial advice. However, it greatly concerns me that the FAMR positions these two important assumptions as facts. The ‘call for input’ wants us to consider the changes needed to improve consumer access to financial advice which need to be based on a clear understanding of the current obstacles.

I hope I am wrong, but taken together, these two statements imply that the government and the FCA are trying to justify further market intervention when in reality if the availability of financial advice is to be increased, as it should be, we need less intervention and greater simplicity.

It looks like the government and the FCA are trying to justify further market intervention

Ken Davy is chairman of The SimplyBiz Group