Industry members have welcomed the regulator’s review of the advice-guidance boundaries and urged for it to “push forward at pace”.
In a speech by the Financial Conduct Authority’s executive director Sarah Pritchard yesterday (September 27), she said the regulator will make sure that it does what is best for the UK, retaining market integrity and protecting consumers.
“One area we are looking at transforming is the advice and guidance rules,” she said.
“Mifid was introduced 15 years ago and had a clear distinction between advice and guidance.
“Offering advice on what to invest in carries with it a heavy regulatory burden. A full suitability assessment – in effect an in-depth MOT of a customer’s personal financial situation - is needed from a qualified financial adviser.”
Pritchard explained because of the costs involved, only the relatively well-off can access advice on what to invest in.
“Mass market consumers are often left to navigate a bewilderingly large choice with little support,” she said.
AJ Bell’s head of retirement policy Tom Selby, said the cost-of-living crisis and ructions in currency markets are seeing millions of savers and investors bombarded with information from all angles and facing often complex choices about what to do with their money.
“Those who are willing and able to pay for regulated advice are well served by the market and should be able to navigate through the current storm with a clear-minded focus on the long-term,” he said.
However, those who do not take advice need better, more personal guidance so they can make financial decisions which are more likely to lead to ‘good outcomes’, in line with the FCA’s consumer duty.
“We welcome the FCA’s acknowledgment of this issue and urge the regulator to push forward its review at pace,” Selby said.
‘A culture of fear’
Last year, the FCA published its strategy on how it will tackle investment harm and ways in which it will improve the advice market, including the cost of regulation.
As part of its consumer investments strategy, the FCA wants to establish a simplified advice regime for mainstream stocks and shares ISAs where the risks to consumers are relatively low.
“This will remove some of the burden of regulation which currently applies across the board to all advisers,” Pritchard said yesterday.
“It will also enable firms to reduce their charges and make advice on mainstream investments more accessible to mass-market consumers.”
Pritchard explained that once the FCA has greater rule making powers under the future regulatory framework legislation next year, it will be able to do more.
However, in order to prepare for that, the regulator is to carry out a holistic review of the boundary between advice and guidance to understand how to reduce the regulatory burden while continuing to provide the right level of consumer protection.