Financial Advice Market Review  

FCA told to clarify streamlined advice definition

FCA told to clarify streamlined advice definition

The Financial Conduct Authority has been told to clarify their definition of streamlined advice as a third of those not currently offering it want to do so in the future.

As part of the Financial Advice Market Review’s aim to close the ‘advice gap’, the FCA is consulting on updating its guidance on an advisory service that meets a simpler or focussed consumer need, so called streamlined advice. 

Steven Cameron, pensions director at Aegon, said there is a huge swell of opinion predicting the growth of this area of advice, with 80 per cent of advisers polled by the provider expecting an increase in demand for streamlined advice services. 

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However, when it comes to meeting an increased demand, the outlook is mixed. 

Of the 37 per cent of advisers who currently offer streamlined advice, nearly six out of 10 (58 per cent) are in favour of extending its use. 

Of those who don’t currently offer it, future intentions are evenly split with 38 per cent saying they’d be interested in offering it, 32 per cent who haven’t made up their minds and a further 30 per cent who are not interested.

When it came to attracting a younger client base, nearly seven out of ten (68 per cent) of those surveyed thought streamlined advice could be a useful method of encouraging younger people as clients, suggesting widespread availability could help close the advice gap and potentially build the foundations of lasting client relationships.

However, this optimism relies on removing certain barriers to the future success of streamlined advice. 

By far the greatest barrier is regulatory risk, with 62 per cent of advisers citing this as a concern. 

This was followed by the time required to develop and market a proposition (22 per cent) and lack of consumer awareness cited by one in 10.

Of the likely scenarios put forward by the FCA, where streamlined advice would be appropriate, 76 per cent of advisers thought it likely that they would use it for ‘fund choice for employees who have been automatically enrolled into their employer’s scheme’. 

This was closely followed by 72 per cent of advisers likely to use it when clients had ‘a small sum to invest’.

The FCA scenario least favoured by advisers was advising on ‘a range of ETFs’, with 64 per cent of advisers suggesting they were not at all likely to use streamlined advice in this situation.

Liz Field, chief executive of the Personal Investment Management & Financial Advice Association, said streamlined advice will be a way for advisers to offer lower cost advice in the future. 

But for successful offerings to develop, Ms Field said advisers must have confidence in their regulatory position in respect of FCA and Financial Ombudsman Service.