The Financial Conduct Authority (FCA) and HM Treasury plan to review their joint initiative, the Financial Advice Market Review, next year to see whether the issues it raised and sought to fix have improved.
In a written answer to Parliament yesterday (25 June), the minister of state at the Department for International Development, Lord Bates, argued the government has “acted to support the development of a market that provides consumers with affordable and accessible pensions advice,” which is why the Famr was launched in 2015.
The FCA and Treasury Famr joint report, published in 2016, introduced 28 market recommendations, aimed at closing the advice gap and achieving “a real improvement in the affordability and accessibility of advice and guidance to people at all stages of their lives”.
At the time, advisers criticised the measures, which ruled out the introduction of a 15-year long-stop but suggested redefining what constitutes regulated advice.
Lord Bates said the review also “proposed remedies to improve supply of affordable advice in the market”.
He added: “These included setting up an advice unit by the FCA to provide firms developing large-scale automated advice models with regulatory support to help bring these to the market more quickly.
“Automated advice has the potential to provide affordable advice to the mass market, with some existing models charging a fixed fee of below £500.”
FTAdviser reported in February that half of the companies in the first wave of the regulator’s advice unit have either launched a low-cost advice service or will be doing so imminently.
Kay Ingram, director of public policy at national firm LEBC, told FTAdviser that she agrees with the FCA’s timeline for following up on FAMR recommendations.
She said: “Given all the changes taking place in the provision of regulated financial advice; the adoption of bionic advice solutions, senior managers regime, MIFID II, defined benefit transfer rule changes, development of mid-life counselling services and initiatives such as the pensions dashboard, the FCA is probably right to pause before finalising this market review.”
Ms Ingram disagreed, however, with the idea automated-advice will be able to fill the advice gap.
She said: “Encouragement of bionic advice solutions is more likely to address this shortfall than continuing to experiment with robo-advice.
“Robo-advice only addresses the cost element of the advice gap but does not provide quality outcomes for consumers. Bionic advice can achieve both.”
Steven Cameron, pensions director at Aegon, argued that recent research from the pension provider showed that financial advisers remain broadly supportive of the FAMR measures.
He said: “However, when it comes to how effective these have been in practice, most advisers are far less positive, which is disappointing if not surprising. Just one in seven believe that FAMR’s key measures are helping to close the advice gap.
“There’s clearly an opportunity for the industry and the FCA to keep working together to identify how to turn a major opportunity into widespread practical benefit and some of that could start earlier than 2019.”