There will be no big bonfire of regulations post-Brexit when it comes to UK financial services, the public affairs director for Pimfa has said.
Simon Harrington was speaking at FTAdviser's Financial Advice Forum 2023, in conversation with Carmen Reichman, FTAdviser's multimedia editor.
He said the announcement of the Treasury’s Financial Services and Markets Bill in 2022 marked a significant step forward in the UK government’s implementation of a post-Brexit regulatory framework.
However, he assured the audience that the advice profession did not need to fear a complete unravelling of the EU regulations that have been embedded over the past couple of decades.
He said: "There won't be a big bonfire of the regulations. We won’t wake up tomorrow and find that we have to completely unwind Mifid.
"But we do forsee some changes around the advice/guidance boundaries."
Harrington said this may be one area where the rules set out in Mifid, regarding the definition of investment advice under the EU rules, might change.
This is especially as the UK regulator is thinking about how UK regulation could enable more practical guidance for the wider public.
They are looking to evolve the landscape as it is currently constructed, rather than rip it up and start again.Simon Harrington, PIMFA"There are issues to address with the definition between advice and guidance, and what does or does not constitute a recommendation.
"We know there are lot of people who are not advised, or would not be able to afford advice, who are now being asked to make very complicated decisions, particularly at the point of retirement, that they are not prepared for.
"While we have services such as the Money and Pensions Service, the standard of information you can get could lead to more questions than answers."
Attempting to make the distinction between what exactly is advice, and what is guidance, Harrington said it would be good to see how to provide more personalised communications or allow companies to make interventions where they can see potential harm.
"I can see that companies might currently be nervous about providing personalised communications to individuals, or intervening, but we would like to see personalised recommendations that might steer vulnerable customers away from tendencies and actions which are potentially quite harmful."
However he added this was currently a minefield, for if you liberalise the definition of guidance too much, what you might inadvertently do is "end up blurring the lines between advice and guidance."
No ripping up the landscape
Without going into specifics, Harrington suggested a pension provider might be able to highlight to a consumer that they only have £50,000 invested in illiquid investments charging 3 per cent a year.
"This is an example of where a company should be able to intervene, but again, our concern with the liberalisation is that you could find yourself straying into where you are giving advice."
As a result, Pimfa is "circling" a set of ideas around how to help consumers and give them better, more targeted information. "What that looks like we do not know yet, but we think it might need some personalisation".
When asked what might happen if there is a change in the government at the next election, Harrington told the attendees: "Even if a Labour government were to come in.
"As far as we understand it, the opposition is conducting its review of the financial services sector and the strong message that we have received from them is that they are looking to evolve the landscape as it is currently constructed, rather than rip it up and start again."
He said while the opposition has highlighted areas for change, they seem to be committed to continuing the reforms proposed for the financial services sector.
