The Independent Review of Retirement Income recommended that financial advisers should undertake a review of their industry to address a number of issues.
First, the report wants improvement and a formalising of the professional standards of advisers, including training – despite the fact the Retail Distribution Review (RDR) introduced such requirements back at the start of 2013.
Second, the Labour party-funded report produced by David Blake, director of the Pensions Institute, called for the introduction of a fiduciary standard for financial advisers who provide full regulated advice.
Third, the report called for “appropriate charging models” for the service offered with a clear demonstration that the charges deliver value for money to the customer and with full transparency over charges.
The RDR introduced requirements for customer-agreed remuneration for advisers more than three years ago.
The report stated: “Financial advisers are not a recognised profession, yet they wish to provide advice on billions of pounds of UK retirement savings.
“Further, research by the FCA shows that customers are put off seeking financial advice because they are unable to trust the advice they receive or judge its quality.”
It added that the “obvious solution” was to transform themselves into a recognised profession.
The report also called on the Financial Conduct Authority (FCA) to review its multiple definitions on guidance and advice with a view to creating a hybrid form of advice.
It stated that the FCA should replace all other categories with just two: personal recommendation and a category which sits in the middle of this and execution-only – financial help.
Financial help, in this context, would replace everything that was not fully regulated fee-based advice where the adviser took responsibility for the personal recommendation.
The report’s summary stated: “There has to be a middle way between guidance and regulated advice.
“Many people’s pots are just not big enough, and their financial circumstances are just not complicated enough to warrant full regulated advice.”
The report also raised the issue of a safe harbour for financial advisers.
Although safe harbour products are available in the US and Australia, the FCA has refused to grant safe harbour to any UK investments.
The report recommended regulators agree a set of criteria for granting safe harbour status to key retirement income products.
“Providers and advisers could not subsequently be sued for offering or recommending a safe harbour product, having first determined its suitability for a client as part of a safe harbour retirement income solution,” the report’s summary stated.