The Financial Advice Market Review (FAMR) has made 28 recommendations for changes to the financial services marketplace. The primary aim of the review, jointly conducted by HM Treasury and the Financial Conduct Authority (FCA), is to improve public access to financial services, amid concerns that advice is too expensive for some consumers, or that others do not see the benefits of advice or are unsure about how to go about finding an adviser.
The Review recommendations include:
• The Treasury should launch a consultation on a proposal to amend the definition of regulated advice, so that a firm’s actions are only considered to be regulated advice when a personal recommendation is made
• The FCA should issue guidance to firms on how they can offer ‘streamlined advice’ and still meet regulatory requirements, guidance which should include a series of illustrative case studies. Firms have previously suggested they could limit the costs of giving advice if they were able to carry out ‘simplified advice’ focussed on a single need area, but have been wary of how the regulator and the Financial Ombudsman Service (FOS) might view the matter
• Trainee advisers to be allowed to give advice under supervision for four years, up from the existing two and a half years, before being required to pass an appropriate Diploma qualification
• The FCA should work with the industry to look at reducing the length of suitability reports
• The FCA should set up an Advice Unit aimed at assisting firms in launching automated advice (or robo-advice) systems
• The Treasury should consider allowing consumers to access a small percentage of their pension fund before the usual age of 55 in order to pay for regulated advice on retirement planning
• The Financial Services Compensation Scheme (FSCS) should look at introducing risk-based levies based on individual products, and on reforming the existing funding classes
• The FCA should review availability of professional indemnity insurance for smaller firms
• The FOS should conduct ‘Best Practice’ discussions with firms and trade associations, where cases of interest can be discussed and best practice going forward can be agreed
• The FOS should consider providing additional guidance for firms via its website
Contrary to media speculation, the FAMR has not proposed allowing simple investment advice to be given without a Level 4 qualification, or suggested a return to commission for investment advice, or proposed a long stop – an over-riding limit regarding how long after the advice is given that a complaint can be made.
Firms should note that these are recommendations only at present, and that the rules have not yet changed.
Tracey McDermott, the FCA’s acting chief executive and joint chair of the Review, said:
“The package of reforms we have laid out today will help increase both the accessibility and affordability of the advice and guidance, to ensure that consumers get the help they really need when they really need it.”
Chris Hannant, Director General of the trade association the Association of Professional Financial Advisers, said:
“We welcome and support the review’s analysis of the problem of ensuring more widespread access to financial advice. However, more could be done and the conclusions represent a missed opportunity. While many of the proposals will be helpful, concrete measures beyond further clarification and guidance are needed. In that sense, the review of FSCS funding is a substantive and positive step in the right direction.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.