The progress report on the Financial Advice Market Review (FAMR) has drawn criticism for a perceived lack of progress in terms of reform.
HM Treasury and the FCA issued the report last month to coincide with the one-year anniversary of its 28 recommendations, and showed that 10 are complete, 11 are on track and seven have ongoing consultations.
The 10 recommendations the government deems to have been fulfilled include a new definition of financial advice for regulated firms, spreading awareness of the “existing flexibility in the rules on adviser charging” among firms and advisers, and helping to improve and simplify suitability reports.
The suitability recommendation consisted of the Association of Professional Financial Advisers (Apfa) releasing guidance on the FCA’s preferences for creating “clear and concise” reports.
However, there have been few concrete changes to practices. One real reform, which allows consumers to take £500 from their pension pot tax-free to seek financial advice ahead of retirement, has now come into force. But a planned increase in the allowance – from £500 to £1,500 – has subsequently been delayed because of the general election.
Tom Selby, senior analyst at AJ Bell, said: “When the FAMR was first launched over a year ago, there was a reasonable amount of fanfare, with talk of it potentially marking the beginning of an advice revolution.
“But a lot of the stuff that came out in the progress report was guidance, clarifying the rules and explaining that everything works. I think the government and the FCA are pinning their hopes on the use of technology to reduce costs and create simplified offerings for people.”
On suitability, Mr Selby, added: “Our biggest disappointment was around disclosure. It’s good that [the Treasury and FCA are] looking at suitability reports as part of the FAMR, but we think it’s a bit of a missed opportunity.
“If you’re going to look at suitability reports, which clearly are an important part of the system, then why would you not look at the key features illustrations and transfer value analysis reports, which advisers also present to clients?”
The progress report represented the final official update on FAMR until 2019, when the Treasury and FCA will carry out a review of the initative’s objectives and outcomes.
kuba.shand-baptiste@ft.com
