FCA advice-guidance review will exclude DB transfers

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FCA advice-guidance review will exclude DB transfers
Therese Chambers, director of consumer investments at the FCA

The Financial Conduct Authority’s review of the advice and guidance boundary will cover both accumulation and decumulation products but will exclude defined benefit transfers.

Speaking at The Investing and Savings Alliance’s Financial Advice and Guidance Conference in London today (March 21), Therese Chambers, director of consumer investments at the FCA said the regulator has been actively considering the scope and approach of the review since the start of the year.

Chambers said both the FCA and Treasury recognise the significance of this work and are keen to ensure that the review is genuinely holistic.

“We will be considering the review from the starting point of a ‘blank canvas’” she said.

“This review should work for the group that these products and services are intended for: consumers.”

Chambers said the FCA also recognises the need to have greater clarity on the remit in which firms are operating and to give greater regulatory certainty for firms to give the support consumers need to make decisions. 

“As such I can today confirm that accumulation products (including GIAs, Isas and pensions wrappers) will be within the scope of this review,” she said.

“We have also taken on board the issues that firms operating in the pensions decumulation space have raised on providing proportionate guidance to consumers. 

“And I can announce that we will also be including decumulating assets, including pensions decumulation, within the scope of the review.”

However, recognising the FCA’s regulatory standpoint that a firm should start by assuming that a transfer out of a pension scheme with safeguarded benefits will not be suitable; the City watchdog said defined benefit transfer advice, even below the £30,000 threshold for advice, will be excluded from this review. 

Additionally, any other pensions that have safeguarded benefits such as guaranteed minimum pension or a guaranteed annuity rate will also be excluded from the scope of the review.   

Joint enterprise with the Treasury

As was announced last year, the FCA and the Treasury will jointly be carrying out a holistic review of the boundary between advice and guidance. 

The chancellor also committed to the review as part of the Edinburgh Reforms in December. 

The FCA said the purpose of the review is for it to gather a detailed understanding of how the boundary is operating and its impact on consumers, which will inform any necessary changes going forward. 

“We want to ensure that we apply appropriate levels of protection to consumers,” Chambers said.

“However, we do recognise that in some cases the regulatory regime is too burdensome and that can conversely act as a barrier to firms delivering services to consumers that they want and need. 

“I want to assure you that I am committed to reducing the burden of regulation, where it is proportionate and practical to do so, if this allows for better consumer outcomes to be achieved.”

Elsewhere in the speech, Chambers said that in the 10 years since RDR, a lot has changed, and regulations need to keep pace with the digital world, to make the most of opportunities and reduce the regulatory burden where there are adequate levels of consumer protection.

Chris Hill, chief executive officer of Hargreaves Lansdown, said: “Early details of the advice/guidance review offer a great deal of promise. We’re delighted to see it will be a joint enterprise between the FCA and the Treasury, which demonstrates real ambition in the scope of the review.

“It’s also excellent news that it will start with a blank sheet of paper, and look at designing the best possible approach from the ground up.”

Hill said the review will undertake in-depth engagement with firms, which he argued is absolutely vital to ensure the final proposals enable organisations to support their clients in the best possible way.

“Changes to the advice guidance boundary will allow greater personalisation of consumer communications, which in turn will increase engagement and drive better decision making and outcomes,” he said. 

“It’s also pleasing that the FCA recognises how crucial digital technology is to this process: how it has transformed financial services, and how it has the potential to radically improve the support provided to consumers.”

Timings for review 

Chambers said this will be a “substantial piece of work” therefore, it is imperative that the regulator gets it right.

“This will inevitably take time,” she said. 

“Together with the Treasury, we are also considering how to organise our engagement with industry as part of this review, beyond the usual engagement we both have with industry to hear all your views and take these into consideration as we shape the review.

“We are also working to bring forward opportunities for more formal input setting out the options that we may be considering and seeking views on the range of issues at play.”

Hill added: "We will have to wait for more detail of the timetable for the work, but the breadth and depth outlined today are hugely positive. We look forward to engaging with this process, and working to bring a step change in people’s finances.”

Last year, industry members 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 in September, she said the regulator will make sure that it does what is best for the UK, retaining market integrity and protecting consumers.

At the time, she said: “One area we are looking at transforming is the advice and guidance rules."

sonia.rach@ft.com

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