In its latest paper on the impact of the Retail Distribution Review and the Financial Advice Market Review published today (May 1), the City-watchdog called for input on the role of regulation, admitting some of its rules may harm the market and consumers.
The FCA stated: "While regulatory costs can be seen as the cost of doing business well, we are also aware that our actions can have a negative impact on the market and, by extension, on consumers."
The regulator asked if points existed in the regulatory system which may drive too many people to seek advice, a similar tone to that of its Mortgages Market Study last month in which it claimed some consumers were being "unnecessarily" channeled into advice.
In its study of the mortgage market the regulator suggested "almost all" new customers were guided to an advised route, which meant some were likely being "unnecessarily channelled" into advice - although it did not think this had necessarily caused any consumer harm.
In its call for input today the FCA acknowledged several changes had been made to the regulatory framework since the introduction of RDR and FAMR, including Mifid II and PRIIPs, and asked if current regulation was supporting the development of advice and guidance services.
The regulator has also called for feedback on any existing barriers to effective competition between firms offering advice and guidance.
The Financial Services Authority, that is now the FCA, launched the RDR in 2006 and implemented the majority of its rules by the end of 2012 as a means to increasing transparency in the industry and ensuring clients received high quality advice.
The introduction of the RDR saw the FCA pull the plug on commission in favour of customer agreed renumeration and the growing cost of regulation saw some advisers leave the industry.
In today's call for input the FCA reiterated its focus on client value for money, asking for feedback on the emphasis placed by consumers on the cost of advice and guidance in comparison to other elements of value for money.
The FCA said: "The development of new business models can improve competition and drive down the cost of advice and guidance services.
"Cost is, however, only one element in determining the value of a service. Other factors include elements such as the quality of the service, the level of support provided and the range of additional features offered."
Christopher Woolard, executive director of strategy and competition at the FCA, said: "Millions of people look for help and support in making financial decisions every year and the aim of the RDR and FAMR was to help the market develop the right advice or guidance service consumers need to make those decisions.
"Consumers and the market are changing rapidly, as technology, employment patterns and inter-generational challenges change the way consumers interact with financial services.
"As well as looking at how the market has evolved since RDR and FAMR, it’s important that our work looks ahead to see how we ensure that this important sector works well in the future.
"We want the market to deliver a range of good quality, affordable advice and guidance services that meet consumer needs."
The regulator is seeking initial feedback to its call for input by June 3 and expects to publish its final report in 2020.
rachel.addison@ft.com
