Financial Advice Market Review  

FCA reveals how it will measure success of FAMR

FCA reveals how it will measure success of FAMR

The regulator has identified three main themes it will use to measure the success or failure of its project to close the gap between those who need advice and those who can afford it.

They are accessibility, affordability and quality of advice. 

These will be tracked on an annual basis and results published on the Financial Conduct Authority’s website.

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This marks the next stage in the Financial Advice Market Review, a joint project between the regulator and HM Treasury, to better equip Britain to make good financial decisions.

To monitor progress on the three themes, the FCA has carried out ‘state of the nation’ type research into the UK’s current habits, wants and needs when it comes to financial advice.

These baseline findings will be used as a benchmark to assess the success of the FAMR in 2019.

This quantitative research shows just 6 per cent of UK adults - or 3.2 million people - received financial advice on investments in the last 12 months.

However 25 per cent of people – 12.8m Britons – have not had advice but might have a need for it.

Of those who had taken advice, just 3 per cent used technology-based automated – or ‘robo’ – advice, with early indicators the 18-34 age bracket were the early adopters.

The research found only muted interest in advice in the workplace, mainly on the grounds of cost and confidentiality, but identified a greater interest in workplace information and guidance. 

Other findings pointed to those less likely to take advice being less aware of how to find a financial adviser, and had given less thought to retirement planning.

One of the key indicators of the accessibility of advice is the number of firms and advisers in the market. 

FCA data showed the number of staff who advised on retail investment products at end of December 2016 was approximately 34,600.

This included 5,218 firms of financial advisers, with 25,611 individuals advising on retail investments.

Independent financial advice makes up the majority of the advice on offer in the sector in 2016 with 83 per cent of firms providing independent advice versus only 15 per cent providing restricted advice.

In respect of retirement income advice the majority of firms in the sample (82 per cent) said that they did not use minimum pot size thresholds. 

Of the 38 firms that reported the minimum pot size thresholds for retirement income advice that they used, 21 had thresholds of £50,000 or less, and 15 of £30,000 or less.

Financial advice firms were asked what they thought were the biggest barriers to them offering mass market financial advice.

They rated fees and levies the biggest barrier, then uncertainty around regulations, then a lack of clarity over what constitutes regulated advice.

On affordability, the results show that just under half (46  per cent) of UK adults would be willing to pay for regulated financial advice if the costs were ‘reasonable’.

However most people set that limit at around £500, much lower than the average and median advice charges.

Overall, percentage charges were on average just over 3 per cent for initial advice and almost 0.7 per cent for ongoing services.