The Financial Conduct Authority is working with The Investing and Saving Alliance and the Association of British Insurers to try and gain some practical examples of areas where the advice and guidance boundary is not working.
Speaking at a press conference today following the FCA's annual general meeting (October 12), the FCA's executive director of markets, Sarah Pritchard said she wanted to make it clear that the legislation around the advice and guidance boundary “is not going to change for the time being”.
“What we have said is that we want to have a holistic review of the boundary between advice and guidance because this is an issue that has been raised over a number of years,” she said.
“We do see through the industry dialogue examples of situations where firms are not going anywhere near the advice guidance boundary themselves, perhaps because they're not clear on it or because they do not have the risk appetite.
“It will be through the industry engagement that we have underway with Tisa and ABI that we will try and get those practical examples of where the guidance advice boundary causes difficulties.”
Pritchard said the ability to change more substantively will not be possible until the FCA is able to have a look at the definition, which was originally introduced under the Mifid regime, and that will be post financial services and markets bill.
She said the FCA is currently looking at how it can encourage greater take up of both guidance and advice across the consumer investments markets.
“Relatively shortly, you'll see us looking at how we could establish a simplified advice regime for mainstream stocks and shares ISAs where the risks are low,” she added.
Pritchard highlighted that the boundary is there for a reason and explained that it is important that consumers are protected.
“This needs some quite thoughtful approach to move away from the current definition, if that is what the evidence shows, and it will need assistance and input from the industry and from consumers,” she said.
The FCA has heard over many years that the boundary does not work well, but equally it is aware that it is really important that consumers have access to good quality advice, particularly when they're making decisions around investing, and in the pensions context.
“We need to do more to look and understand the practical examples where it isn't working and what you've heard us say is that we've already got underway some groups of industry stakeholders to explore practical, different difficulties,” she said.
“The aim of doing that now is so that when the future regulatory framework is passed into legislation, and there is a greater ability to then consider the potential for further change that we have taken forward some initial work to inform those broader discussions at that time.”
Pritchard added that while the weight of regulation is important and should be commensurate with the level of risk, equally “moving away from a one size fits all approach will be complicated”, and it will need assistance from both industry and consumer groups too.
During the AGM earlier today, the FCA said it is looking at the Blackmore Bond scandal in the same “forensic detail” as it has done with the London Capital & Finance scandal.
The FCA’s executive director of enforcement and market oversight, Mark Steward said the regulator’s focus in relation to the bond scandal has been focused on the way in which those financial promotions operated.
sonia.rach@ft.com
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