In a Call for Input paper published today (September 15), the City watchdog said there were consumers who were likely to be looking for “straightforward, one-off or focused advice”.
Such consumers would need an adviser to consider their relevant personal circumstances, but not necessarily an ongoing relationship with an adviser, the FCA said.
The regulator said: “This type of investor would benefit from access to a ‘pay as you go’ form of focused advice model.
“Most advice is provided on an ongoing basis and we believe there is likely to be an unmet need and, therefore, an opportunity for focused advice models.
"To date, we have seen slow growth and innovation in services that meet these needs. We are told by firms that this is often because of concerns about costs and liabilities if things go wrong.”
The FCA said consumers with long-term needs, and typically wealthier, were well-provided for in the market, with 94 per cent of advisers offering ongoing advice services, but it wanted to improve the options for other consumers.
As part of its Call for Input, the FCA is asking the industry to provide views on whether straightforward financial advice can help consumers make effective investment decisions and what barriers exist to providing simple advice models.
Unsuitable advice
The regulator also sought views on the main causes of unsuitable advice and how it could target and prevent unsuitable advice without imposing additional requirements on firms which provide suitable advice.
It already uses a range of tools to target advice firms where there is a risk of harm - such as requiring firms to cease new business or complete reviews - but it is now considering whether it needs to do more to ensure firms maintain high standards in this area.
The FCA said: “We want to reduce the amount of unsuitable advice firms give. This is challenging in a market with more than 5,000 advice firms and over 27,000 advisers, where the majority of advisers are meeting our standards.
“We want to target our activity so it focuses on the minority who give poor advice, forcing them to raise the standard of their advice or leave the market.”
Guidance gap
The FCA said it was concerned about the “frustratingly slow” growth in financial guidance models.
It said: “Many [consumers] said they’d like access to either good guidance or simple forms of advice to help them make certain financial decisions such as setting up a stocks and shares Isa.
“This is why there has been a lot of discussion about ‘financial guidance’ which helps people identify their options and narrow down their choices but does not recommend a particular product or course of action.
“We believe it is possible to set up financial guidance models that support consumers, without straying into giving personalised advice.”
imogen.tew@ft.com
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