The FCA's boundary review could change the adviser workforce

But how is it going to actually be implemented? And what impact will it have on firms on the ground that are rolling the new guidance out?

The FCA is seeking views on three specific proposals:

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

We know already that changes in regulation and legislation have a direct impact on how firms structure their advice models and their advising structures.

One key difference in strategy for firms is how they approach their recruitment and business growth, factoring in the changes in legislation. 

We have been working with firms who have been gearing up for this transition for some time and implementing different advice models across their businesses, regardless of the eventual outcome. Firms often see value in having a tiered approach to their advice offering.

By segregating the levels of advice and the categories that different customers fall into, it enables them to create different working models and fit their advice model around it.

With the advice-guidance boundary review, if we can implement those boundaries, this would be an ideal breeding ground for trainee financial advisers.

We work with firms that operate a more restricted offering for the mass market, but have a restricted-plus or access to the wider market offering for those clients that require it.

The latter requires a deeper level of understanding and technical competence and a more experienced adviser to handle it and so firms can have differing tiers of advisers, from junior/new entrants to senior financial planners.

This could be extended to offer a guidance only offering. Of course, the robo-advice model is something that has also been evolving over recent years, which, in the main, serves the less complex cases or the mass market.

The more hands-off approach, which widens the accessibility to more who need it, could also be used in offering a guidance-only approach. 

We have other firms who are operating a fixed fee model, which they find works for their business and their clients and assists them in offering a standardised service to a wider market.

This enables them to bring in advisers who are focused on serving clients, with a structured and standardised approach to achieving client-focused goals. This model could also be applied to work for simplified advice.

Financial coaching is another growing offering and we work with many businesses and individuals who have qualified as financial coaches to give that extra depth to the support they can give their clients.

They work by educating and empowering their clients to understand how to manage their money and create plans to achieve their financial and wealth goals. But they are not bound by the same regulatory requirements as regulated financial advisers.

With the review we may see more of this and with an increased uptake of guidance this could play in very nicely to help businesses strengthen how they are supporting their clients and securing that relationship. 

An ideal breeding ground

We are already seeing a growing trend – which we absolutely anticipate more of throughout 2024-25 – of firms who have acquired smaller businesses and who are then recruiting for servicing advisers to look after those clients.

As this trend evolves, I believe we will see more firms growing their trainee advisers by segmenting the advice needs of their clients and giving the trainee adviser the clients with less complex advice needs.  

With the advice-guidance boundary review, if we can implement those boundaries, this would be an ideal breeding ground for trainee financial advisers to start their training offering guidance only and working up towards the advice-giving roles, which we all know we are in great need of growing.

We can look at growing the industry by bringing in graduates or second careerists who want a career in professional services and they can go through their diploma (and beyond) while helping clients who do not need full regulated advice but want that human support and guidance. 

We work closely with business owners using profiling tools and hands-on support in structuring their strategy.

Technology is supporting the industry more and more and will really assist the advisers in becoming more efficient and releasing the burden for them from doing the tasks they generally do not love and spending more time with clients. 

We already see firms specialising in key areas, for example advice for sports professionals, teaching, healthcare, and with the advice-guidance boundary review we could see much more of that, enabling individuals to niche in an area they feel a genuine affinity to.

We are seeing more and more the entrance of the likes of Ontario Teachers' Pension Plan, pension plans who have bought into investment management and advice businesses, and I wonder how that will pan out alongside the new guidance post-review for growth in the UK advice space.

Clear guidelines needed

What I would like to see from the review is clear guidelines on the three key areas put in place to enable advice firms to build and train their teams accordingly. 

We work closely with business owners using profiling tools and hands-on support in structuring their strategy.

This might be for growth for firms on that trajectory, or building to maximise sale price. Or this might simply be for more effective and efficient working practices to alleviate pressure on owner-managed businesses or businesses simply wanting that assistance in navigating new legislations and policies as they get introduced (for example the advice-guidance review).

Regardless, we understand that the pressure on business owners and leaders is very real as they work around the ever-changing guidance and legislations.

Whatever the agreed outcome for the advice-guidance boundary review, one thing is clear: it will impact future hiring strategies. 

Rachael Fennessey is director of Aspire Executive Search