FCA review a 'genuine effort to really start to solve the problem'

The director of policy and communications at Royal London says there is a lot of "positivity and pragmatism" in the regulator's latest proposals to more clearly define the boundary and introduce a form of targeted support and simplified advice.

He tells FT Adviser: "From discussions that I've had, my sense is this isn't just another, you know, attempt at sort of changing things around the edges. It is a more genuine effort to really start to solve the problem."

And he says it is not just about closing the so-called advice gap, there is a wider issue with guidance and support too, which this consultation addresses.

"A lot of what we do is currently framed in the negative," he says, "telling people what not to do, and the risks of things going wrong rather than what would be helpful and sort of steering them towards what they might do.

"And we've become obsessed with the idea that the answers need to be right for everybody all the time, rather than what would be beneficial for most people most of the time, and certainly a better outcome than saying nothing."

The FCA has proposed to allow authorised firms to recommend products based on what would be suitable for 'people like you'.

It also wants to establish a form of simplified advice that allows advisers to recommend a product without paying attention to the client's whole set of circumstances. For instance, they could advise on investment Isas without considering their client's pension situation.

It would allow advisers to only hold qualifications in the single area or product on which they advise, nevertheless many, including Jenkins, say there will be limited interest from established advice firms.

There's a responsibility under the consumer duty to ensure that you're using the right data in the right ways for the right people.

"There hasn't been the growth of this kind of regime under previous proposals, and there hasn't been a huge amount of interest in it," he says.

"I think there is space for it... It's difficult to determine whether it will work and who will adopt it."

But he notes there could be interest from robo-advice services, as demonstrated in Australia where digital services have proliferated over the past 10 years.

"Those who are trying to deliver full financial advice online I think have struggled. That's what I've picked up. Where there's been success in the sort of digital advice offering is in the space of trying to give advice around a very narrow need," he says.

"My sense is that people are more receptive to paying a small fee for that type of service. Rather than saying, I'll do my whole financial advice online."

In contrast, Jenkins says, there is a lot of interest in developing targeted support, which could also attract digital providers due to its data-led characteristics.

Jenkins, who had turned down a trainee position as a commercial pilot for a role in financial services when he first started out, says getting financial services right for people was of utmost priority.

He says he does not believe either option poses a threat to financial advisers. It is not the FCA's intention to do so, he notes.

Liability a legitimate concern

But one area of legitimate concern he points to is what to do about liability when things go wrong.

"Advisers are rightly concerned about the overheads they have now, paying levies for compensation services and you know, indemnity insurance and all those sorts of things and they are quite extraordinary."

He says the liability for an expanded advice space cannot be passed on to advisers currently operating in the market, "that needs to be, if anything, looked at with a view to reducing that overhead rather than increasing that liability."

Jenkins says targeted support, despite being non-advised, cannot be free of liability either.

"If you are using data to enable you to make some kind of recommendation to groups of people or individuals based on groups of people then there's a responsibility, if nothing else, under the consumer duty to ensure that you're using the right data in the right ways for the right people."

It is about ensuring good outcomes, one of the core tenets of the consumer duty, he says.

He acknowledges the danger coming from social media, where unauthorised people could be seen giving guidance and even advice and not be held liable, but says introducing the FCA's proposed regime could help weed out those people "and help focus everybody on more established sources of information".

What's more, if people get used to getting authorised guidance along the way from an early age they might be more likely to recognise the value of advice later on when their needs become more complex, he adds.

A changing market?

There has been criticism the FCA's proposals, especially targeted support, could be favouring larger firms. But it could work either way, says Jenkins.

"When you change the regulation in a significant way like this, on the one hand it may seem that fits very well with that model of operating, that modus operandi, and you might say vertically integrated firms seem like the [beneficiaries]...it could work either way."

He explains an expansion of vertically integrated firms could put more of a spotlight on how such a service works and then create more scrutiny, making it more burdensome to place business with their own partner, a practice that, again, falls under the auspices of the consumer duty.

"The more you're packaging services together the more attention you probably need to pay to demonstrating that point – how are they getting good outcomes when compared with an independent financial adviser who is advising on all of the options in the market," he says.

It is more likely the outcome will be that there will be opportunities for customers of all types of firms, he adds.

carmen.reichman@ft.com