The Financial Advice Market Review (FAMR) was launched in August 2015 with the purpose of identifying ways to maximise the availability of financial advice to consumers. The review was driven by concerns that there are significant barriers to providing affordable advice to some consumers. The FAMR final report (March 2016) identified a number of key areas in which improvements could be made, and the FCA has subsequently released an guidance consultation paper – GC17/4: Financial Advice Market Review (FAMR): Implementation part 1.
Who does this consultation affect?
The guidance is primarily aimed at “firms providing advice on or distributing retail investment products and financial instruments to retail clients.”
Section 5 targets employers and trustees wishing to provide financial help to employees and members without the need to be regulated. The guidance may also be of interest to trade associations and consumer groups”.
Implementation Part 1
GC17/4 is the first part of a two-part strategy focusing on consultation around four key areas. Part two is anticipated in Summer 2017 and will cover other aspects arising from the FAMR. The four areas for consultation in GC17/4 are as follows.
The review highlighted the need for a streamlined advice process, utilising a framework which can offer advice on “simple customer needs in a proportionate way”. To achieve this, the FCA has indicated it will support firms by issuing further guidance which will include examples of good and poor practice … watch this space!
Some products may not be appropriate for a streamlined advice process due to their complex nature and the requirements of the customer. Firms should therefore be able to demonstrate how their streamlined advice model meets existing regulatory obligations on a case-by-case basis.
Streamlined advice services are likely to deal with specific client needs rather than provide a holistic review of client circumstances. As a result, certain client situations and products would not lend themselves to being appropriate for streamlined advice services. Therefore, the paper suggests that firms could implement a triage-style filtering system which would filter out certain clients whose needs are more complex. Consultation with the regulator around these areas is therefore encouraged prior to the July 2017 deadline.
Fact Find Process
The consultation highlights the continued importance of the fact find process in making suitable investment recommendations, including accurately capturing information on the customer’s knowledge and experience, financial situation and investment objectives. However, it is suggested that “porting” of data from previous meetings can reduce the costs and time associated with the fact find process and help deliver a more attractive solution to customers, something that can be achieved by adopting a more “innovative use of technology” and “digital functionality”. This can reduce duplication and allow the adviser to focus more on key customer areas.
Other recommendations include asking the customer to pre-populate elements of the Fact Find, prior to meetings with advisers. However, it is noted that a new fact-find will be appropriate where the customer has not received advice for some time or where they have undergone a significant change of circumstances e.g. change of career, birth of child or change of marital status. The regulator is keen to engage with firms around these aspects.
The consultation sets out to clarify the FCA’s thinking on some areas of uncertainty in relation to the boundaries of personal recommendations, regulated advice and generic advice. The FCA is encouraging views on whether additional clarity is required surrounding existing guidance on non-regulated firms (Article 53) and whether a service they provide might be considered as personal advice. The consultation period for non-advised sales is May 2017, earlier than the remaining areas which conclude in July 2017
Employer and Trustee Factsheet
Concerns had been raised by employers and scheme trustees about their fear of overstepping regulatory guidelines and entering into a position where they may be deemed to be providing advice. Some employers / trustees believed they may be exposed if they offered support to members. As part of the consultation, a factsheet will be issued providing guidance to employers / trustees on how they can support members without straying into the area of regulated financial advice.
Time line for responses
Firms are encouraged to engage with the FCA in relation to the areas that impact their business prior to the time line indicated below.
Proposals for consultation on –
- Streamlined advice;
- Fact Finds;
- Employers’ Fact Sheet;
- Non-Advised Services.
Consultation period ends for Non-Advised Services and feedback will support FAMR implementation part 2 (December 2017).
Consultation period ends for remaining guidance.
Finalised guidance on Streamlined Advice and Fact Finds. FCA and TPR publish employers’ factsheet.
FAMR Implementation Part 2 – Policy statement to be published.