Regulation  

FCA to consult on advice regime for stocks and shares Isas

FCA to consult on advice regime for stocks and shares Isas
 

The Financial Conduct Authority has committed to consult later this year on an advice regime for investing in stocks and shares Isas.

The FCA said it would consult on a “more proportionate” advice regime for investing in stocks and shares Isas and then carry out a holistic review of the boundary between advice and guidance.  

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.

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AJ Bell’s head of retirement policy Tom Selby said recent events have exposed some fundamental and dangerous misunderstandings about the risks associated with different kinds of pensions, but a lack of clarity on what constitutes advice has held firms back from communicating.

“Savers and investors are clearly crying out for help,” he said.

“We need to reset the relationship between industry and regulation, with a clear focus on ensuring good outcomes for consumers, in line with the core aim of the consumer duty.”

Selby said as many people as possible needed to be encouraged to take “full-fat” advice, but a simplified advice model could boost the number of people taking regulated advice.

“This isn’t about pushing back the advice-guidance boundary, but instead being clearer about exactly where that boundary sits. 

“At the moment, non-advised platforms, employers and others are held back by a fear of straying into advice.”

The FCA is currently reviewing the advice-guidance boundary, which dictates what constitutes advice (a regulated activity), and what is guidance (which is unregulated). 

However, the regulator’s executive director of markets, Sarah Pritchard, said earlier this month that the boundary “is not going to change for the time being”.

Consulting and restricting

The FCA also announced it will be consulting this year on a “more proportionate” advice regime for investing in stocks and shares ISAs.

It comes as the regulator revealed it had restricted 17 firms and seven individuals this year, after it suspected their involvement in phoenixing or lifeboating.

These restrictions included preventing firms from promoting and selling certain products, or providing specific services like advice on DB pension transfers.

One in five applications from firms wanting to join the consumer investment market last year were not approved or were withdrawn, the regulator added, and it published 40 per cent more consumer alerts about unauthorised firms or individuals in the same period.

The FCA estimates that its intervention has saved consumers £100mn a year.

This intervention from the FCA form's part of its updated consumer investments strategy, which is aimed at helping people invest with confidence, while seeking to reduce the number of people who are persuaded to invest in products that are too risky for their needs and to slow the growth in investment scams.

Pritchard said: "We want to see a consumer investment market where consumers can invest with confidence, understanding the level of risk they are taking, and where assertive action is taken when harm is identified.