FCA sets out three proposals as part of advice boundary review

The proposals aim to help more people access to advice and benefit from investment opportunities to help them provide for later life, save for major expenses or tidy up their finances. 

As part of the joint advice-guidance boundary review, the FCA and government are seeking views on three proposals.

These are:

• Further clarifying when firms can give consumers support without giving regulated financial advice
• A new approach allowing firms to provide support tailored to groups of people in similar circumstances
• A new form of simplified advice that makes it easier for firms to provide affordable personal recommendations to clients with more straightforward needs and smaller sums to invest

Sarah Pritchard, executive director of markets and international at the FCA, said: “We want to open the door for more people to get the right advice or support to manage their money at the time they need it and at a cost they can afford. 

“We’ve already helped firms test drive innovative solutions but we want to go further. 

“This review will help us produce new rules to deliver this important step change for industry and consumers.”

The FCA said the proposals could help consumers in a number of different scenarios. 

For example with the targeted support proposal, an FCA-authorised firm could describe to a consumer the different ways available to them of accessing their pension when they do so for the first time.

Firms could also highlight to a customer holding excess cash in their bank account that inflation could erode the value of their savings, describe the value of investing, and suggest products based on an understanding of the customer’s target market.

The simplified advice proposal could enable advisers to help a consumer who wants the assurance of financial advice to invest a one-off lump sum. 

Under this proposal the consumer could receive a suitability assessment and personal recommendation for how they should invest, but this would not take into account their wider financial situation. 

Alternatively, the simplified advice proposal could allow an adviser to help a consumer who has never reviewed the funds they are invested in and feels their attitude to risk has changed.

This would allow an adviser to review the funds and recommend alternatives that are suitable for them now. 

Industry support

Simon Harrington, head of public affairs at adviser trade body Pimfa, said too many people were currently expected to make significant financial decisions without the necessary level of personal expertise, or the right level of support to guide them.

“Clearly it would be preferable for everyone to have access to a fully qualified financial adviser but we are aware that this is both unrealistic and also uneconomical for millions of people,” he said.

“With that in mind, we believe that the proposals put forward today will go some way to closing the UK’s support gap – ensuring that people are able to access targeted financial advice which is relevant to their needs. 

“It is vital that firms feel empowered to provide support without the concern of being seen to provide financial advice and we are hopeful that this will manifest itself in a manner that consumers derive value and meaning from being told what people like them would do in similar circumstances.”

But Harrington said for these proposals to be successful, it was vital they be both commercially viable for firms as well as ensuring consumers are guided towards good outcomes for them, rather than the firm guiding them. 

“We will continue to work closely with both parties on this review in the spirit of the welcome practitioner led approach that the review has been conducted in up to this point,” he said.

Andrew Tully, technical services director at Nucleus, said planning was a key part of how confident someone is about their financial prospects in retirement. 

He explained that giving more people the chance to access the support they need to make their money work harder is a step in the right direction. 

“We are big supporters of advice and know just how much it can help people achieve good outcomes,” he said.

“The proposals from the FCA and government could encourage millions more to save for their future and as their needs become more complex create further opportunities for advisers.”

Meanwhile, Alastair Black, head of savings policy at Abrdn, said it "feels like the start of a real shift in the regulatory environment”.

Black said this will allow advisers and providers to help more customers.

He explained that the two key proposals were targeted support and simplified advice. 

“We are pleased to see the government trying to address both sides of the gap,” he said. 

“We will look to support our key adviser business partners and the government in developing these proposals to maximise their chance of success.

“We were also pleased to see the government mention the need for the simplified advice regime to avoid having to take into account consumer’s wider financial circumstances (allowing the advice to be targeted).  

“If effective, this will maximise the chance of advice firms keeping costs for their clients down and growing capacity which benefits all.”

Ultimately the long-term goal needs to focus on a commercially viable simplified advice regime to help the masses in retirement, he explained.

“This is where the greatest need is. It doesn’t look like these proposals address that but they feel like a step in the right direction.”

The FCA and Treasury are inviting feedback on the proposals by February 28, 2024. 

sonia.rach@ft.com