Among the paper’s 28 policy recommendations to increase access to and affordability of advice, was a call for HM Treasury to look at the definition of regulated advice as set out in the regulated activities order so it is based on a personal recommendation.
This would bring the definition of regulated advice in line with Mifid rules.
A consultation on the definition would be accompanied by Financial Conduct Authority guidance on firms that want to offer ‘streamlined advice’ on a limited range of consumer needs - without needing to consider all of their personal circumstances - backed by case studies highlighting the main regulatory concerns when designing such models.
The aim is to implement changes in this area in early 2017, noted the report.
However the plans have been met with a tepid response by the industry.
Hargreaves Lansdown’s head of retirement policy Tom McPhail stated proposals to clarify the boundary between advice and guidance should allow firms more latitude to deliver useful guidance without having to charge an advisory fee or worry about inadvertently straying into giving personalised advice.
“We’re less convinced about extending the development process for advisers and the notion of streamlined’ advice,” he commented.
“Where regulated advice is given it should adhere to high standards; there is a risk that these proposals could undermine this extremely important principle and allow poor practices to creep back into the industry.”
Where regulated advice is given it should adhere to high standards; there is a risk that these proposals could undermine this extremely important principle.Nick Hungerford, chief executive at Nutmeg and a member of the FAMR’s expert panel, said he agreed that the UK’s advice definition should fall into line with Mifid’s definition and was glad to see more space opening up for firms to give customers generic information and guidance about financial products, without having to burden the customer with a lengthy on-boarding questionnaire.
“This can often deter those looking for advice and end up being unnecessary for the circumstances, as well as providing an excuse for advisers who do not want to serve clients with more humble means.”
Chris Hannant, director general of the Association of Professional Financial Advisers, said the report’s conclusions represent a missed opportunity.
“While many of the proposals will be helpful, concrete measures beyond further clarification and guidance are needed,” he commented, adding that Apfa will look to revisit the debate about advice access in the near future.
Advisers were also less charitable with the review’s conclusions.
Chris Budd, financial consultant and managing director of Bristol-based Ovation Finance, said the headline proposals on advice definitions were “a waste of time” as the public simply “don’t care” what words are used, adding that this is just “a compliance matter” for the regulator.
Darren Cooke, Chartered financial planner at Derbyshire-based Red Circle Financial Planning, said that while he welcomed more clarity on advice definitions, the fact that robo-advice was essentially now robo-guidance under the new proposals was not going to help matters.
“Consultation on top of consultation just means more delays in sorting this mess, we might actually get some action in a few years time.
“I suppose we shouldn’t have expected much more from the review, given the expert panel was stuffed with vested interests,” he added.
peter.walker@ft.com
