In the past year a significant catalyst in the financial advice sector’s continuing metamorphosis from an industry to a profession was of course the RDR, and by April this year we will know the initial findings of the Financial Advice Market Review, which are expected to be announced by the chancellor in his Budget speech.
FAMR is a unique opportunity for the advice profession to influence the next phase of evolutionary change to better meet the public’s financial planning needs. Hopefully we will see the introduction of some much-needed regulatory reforms to support the transformation, and to create a more stable and sustainable landscape from which to increase access to regulated advice and service.
But perhaps the biggest single issue advisers want FAMR to address is what many view as unfair and unsustainable regulatory costs. Alternative funding solutions must be found – for the FSCS in particular – whether that be some form of product/investment levy, or a pooled-insurance system to eliminate the seemingly never-ending and sometimes crippling additional levies.
Consumer demand for the greater use of internet technology and increased ‘self-service’ automation will very likely see ‘robo-advice’ become a widely-accepted part of the financial services mix.
Technology will certainly play an ever-greater role in the advice process, and I believe such streamlined solutions complement, rather than threaten, regulated advice. A word of caution, though: even though they increase public access to advice, you cannot automate critical systems without running the risk of creating another formulaic mis-selling scandal. They also provide a very attractive proposition for scammers, which must be borne in mind.
There is little doubt however that professional advice is establishing a growing reputation. Demand has never been greater, and is set to increase further in the coming year, with pension freedoms continuing to create a need for advice from consumers who otherwise may never have sought it.
This increasing recognition for professional advice in areas of pension complexity and risk is testament to how advice is perceived today, compared with the past.
The primary driver for mandating advice, however, is recognition of the unintended consequences that will occur if inappropriate decisions are made with regard to to current and future needs.
Endorsed by government reforms, advice provides valuable support to help avoid poor outcomes. The chief risk for the profession sits more around insistent client facilitation, which must be addressed to provide certainty of future treatment.
This is a particular area of concern, primarily to ensure the public’s best interests are served, but also to protect the reputation of the profession in the long term, with advisers still uncertain as to future treatment by both the FCA and Fos.
Last but not least, I fervently hope that we continue to see the re-emergence of a national savings culture, as more of the public at large, assisted and incentivised by their government, realise the need for greater self-dependency, supported by a more vibrant financial services sector. The new year will hopefully herald a more united financial services sector in the same way that advisers have become more united as a profession over the past two years. It is time to move forward for the benefit, and protection, of the consumer.
Overall then, a year of exciting change beckons for a financial advice profession that was already evolving prior to the pension reforms. With the burden of over-regulation and cost potentially addressed by FAMR, the future looks more promising than it has done for many years.
Keith Richards is chief executive of the Personal Finance Society
