Launched in August 2015 in the light of concerns that the market for financial advice was not working well for all consumers, the Financial Advice Market Review (FAMR) has finally been completed and the report was published in March 2016. Eight months of effort, lots of consultation and even more anticipation – was it worth the wait?
The stated aim of the Review was to explore … “ways in which Government, industry and regulators can take individual and collective steps to stimulate the development of a market which delivers affordable and accessible financial advice and guidance to everyone, at all stages of their lives.”
Despite the high level of anticipation, and perhaps expectation, advisers might baulk at reading the report’s 85 pages. This summary should be helpful.
Three years since RDR; pensions flexibility; consumer distrust of financial services companies; a greater awareness of the cost of advice. These all contributed to the desire to assess the state of the financial advice market in the UK.
The review made recommendations in three key areas …
- Affordability – how to make advice more affordable to the mass market;
- Accessibility – giving consumers more information and confidence in relation to financial decisions;
- Liabilities and consumer redress – giving advisers more confidence regarding the FOS, and re-thinking the funding of the FSCS while at the same time maintaining consumer protection.
The review made 28 recommendations – these are summarised below – omitting the more technical suggestions relating to MiFIDII or Treasury and other consultations.
Recommendations on affordability
- There should be a consultation on the definition of regulated advice, leaving more space for other forms of advice and guidance;
- The FCA should provide more support to firms seeking to develop and offer services that help consumers make their own financial decisions;
- The FCA should develop a clear framework that gives firms the confidence to provide streamlined advice on simple consumer needs;
- The FCA should help firms to take on new trainee advisers by permitting them to work under supervision for up to four years before obtaining an appropriate qualification;
- The FCA should consult on the cross-subsidisation rules, in order to allow firms greater flexibility in their pricing models;
- The FCA and firms should work together to improve suitability reports, reducing their length and the time taken to produce them;
- The FCA should help firms to develop automated advice models.
Recommendations on accessibility
- The FCA and The Pensions Regulator should work to develop a factsheet to set out what help employers and trustees can provide on financial matters;
- The Financial Advice Working Group (FAWG) should work with employers to develop and promote a guide to the top ten ways to “support employees’ financial health”;
- The Treasury should explore ways to improve the existing £150 tax and NI exempt allowance for employer arranged pensions advice;
- The Treasury should explore options to allow consumers to access a small part of their pension pot to cover pre-retirement advice;
- The FCA should remind firms of the flexibility in the rules on adviser charging;
- The Treasury should ‘challenge firms to create a pensions dashboard’. This is intended to be one place where consumers can see ALL their pensions;
- The FAWG should publish a shortlist of new ways to describe ‘guidance’ and ‘advice’ to be consumer tested;
- The FAWG should ‘lead a task force to design a set of rules of thumb and nudges’. This is intended to encourage people to engage more with financial advice at key points in their life;
- The Treasury should assign continuing responsibility for the rules and nudges to an appropriate body.
Recommendations on liabilities / consumer redress
- The next FCA review of FSCS funding should explore the merits, risks and practicalities of alternative approaches;
- The FCA should consider a review of the availability of PII cover for smaller firms;
- The FOS should consider holding regular round table discussions with industry bodies;
- The FOS should publish more detail on its uphold rates;
- The FOS should consider establishing a more visible central area on its website to help advisers;
- The FCA should not introduce a long stop limitation on referring complaints to the FOS.
Further work is now planned. In particular, the FCA is due to publish the result of a survey on the provision of financial advice in April 2016.