The announcement of the Financial Advice Market Review (FAMR) in late 2015 was viewed by many as a watershed moment for the advice industry. Years of grappling with the impact of the Retail Distribution Review (RDR) and other regulations had left many intermediaries feeling pretty downbeat about the sector’s prospects. Here at last was an initiative that suggested the government was on its side.
Final proposals, produced in March 2016, were somewhat underwhelming. This, it could be argued, was inevitable: there was no magic wand available to implement structural reforms overnight.
A year on from the final report, and levels of enthusiasm remain relatively low, but signs of progress are becoming apparent on a few fronts. As the FCA and Treasury, jointly responsible for the FAMR proposals, prepare to issue a progress report to economic secretary Simon Kirby and the FCA board, the outlook is finely balanced.
Responsibility for the 28 recommendations put forward in the review is split between the Treasury, the FCA, the Fos and the FAMR working group.
With 11 recommendations to tackle, the FCA oversees the largest share of recommendations, while the Treasury is in charge of six, the Fos in charge of four and a working group in charge of three. Responsibility for the final four recommendations sits jointly with the FCA and the Treasury.
So far, few recommendations have had the opportunity to have an impact on the financial advice market. As Table 1 shows, just nine of the 28 recommendations were scheduled to begin last year, and many were simple objectives (such as the introduction of Fos roundtables with advisers) or the first steps towards future goals, such as the launch of the consultation on FSCS funding reform.
Other factors have also served to delay the potential impact. The two overseers of the review, the FCA’s Tracey McDermott and the Treasury’s Charles Roxburgh, have since left their posts. Mr Roxburgh remains at the Treasury in a more senior position, but the department would not be alone in believing that the newfound responsibilities of Brexit will supersede all other work in the coming months.
“As negotiations regarding the terms and conditions of the UK’s withdrawal from the European Union continue in 2017, a degree of uncertainty is likely to linger for some time yet”, says Keith Richards, chief executive at the Personal Finance Society (PFS).
Nonetheless, the bulk of the recommendations are due to be implemented in some form this year, as Table 2 shows. This could prove to be a double-edged sword for advisers. As much as they would welcome meaningful progress on many fronts, if FAMR is to succeed in its aims, the sheer weight of consultation and change being discussed and debated could prove to be exhausting. According to the PFS’s annual Member Survey, 75 per cent of advisers surveyed considered regulation and compliance costs as the “biggest threats to the success of business in the next one to three years”, compared with just over a third of those surveyed (34 per cent) who pointed to the UK’s withdrawal from Europe.
In general, progress remains slow. But one issue that has evolved swiftly is the introduction of the pensions advice allowance. Originally set at £500, an increase to £1,500 (split across three tax years) has been introduced less than six months later. But concerns remain about advisers’ ability to offer their services for this amount.