Firms seeking to offer cheaper, technology-led alternatives to face-to-face advice can now apply to the regulator for help, as its automated Advice Unit goes live.
The Advice Unit - announced in the Financial Advice Market Review report - will focus on helping firms develop fully or partly automated online services and other models that use technology to deliver lower cost advice.
These alternative models must provide a ‘personal recommendation’ or discretionary investment management services to clients.
Advisers who apply and are selected to receive guidance from the unit will have to demonstrate their potential to deliver lower cost advice to “unserved or underserved consumers” and offer “genuine consumer benefit”, according to criteria published on the regulator’s website.
Successful applicants will receive individual regulatory feedback, which could include an initial meeting with the unit and other specialist areas of the FCA to discuss the firm’s proposition, as well as a dedicated point of contact to discuss the regulatory implications of the proposed model.
For unauthorised firms, it could also mean support to gain the required FCA permissions.
As part of its general, industry-wide feedback to “promote effective competition and to ensure that the wider industry benefits from the initiatives of the Advice Unit”, the regulator will publish regular anonymised reports setting out the key lessons learned from the unit’s work with individual firms.
Firms working with the unit will still be subject to all of the existing consumer protections that apply in the UK, including the FCA’s threshold conditions and standards for authorising firms.
Consumers who engage with authorised firms providing automated advice models will also continue to have the same access to the Financial Ombudsman Service and to the Financial Services Compensation Scheme as they would do under more traditional advice models.
Firms have until the 1 July to apply. The FCA will reply in August 2016 to tell notify firms whether their application has been successful, with reasons.
Once the initial application period is over, the unit will reassess how firms can apply to ensure that it meets industry demand. This could be through a further application period or by moving to a rolling application process.
Rohan Sivajoti, advisory services director at robo-adviser eVestor, which bought his Yorkshire-based firm Postcard Planning in January, said the FCA’s focus on unserved or underserved consumers is “really pleasing”.
“Along with the other rhetoric of ‘genuine consumer benefit’ this really does feel like a highly consumer focused initiative which is great. Focusing on the benefits to the end consumer will surely hold firms in good stead in creating better outcomes.
“The fact that the assistance is free also helps anyone, regardless of size, get their plan into action. What’s the worst that could happen for an adviser applying? I see very little, if any, downside and the regulator should be applauded for this consumer focused initiative.”