The Treasury and the Financial Conduct Authority (FCA) have jointly launched the Financial Advice Market Review. This will look at whether the financial advice market is working in the interests of consumers. According to the Treasury’s press release, it aims to “radically improve access to financial advice.” It will cover all product areas, including pensions, investments, insurance, mortgages and consumer credit.
A consultation will be conducted in autumn 2015, and the Review will be published ahead of the spring 2016 Budget.
The key elements of the review will include:
• Examining the apparent ‘advice gap’ that exists where some consumers wish to receive financial advice but have limited wealth
• The regulatory barriers and other restrictions advisory firms face
• The advantages and disadvantages of using new technologies when giving advice
• Encouraging demand for financial advice, and examining what puts people off receiving advice
It will also look at the relationship between the regulator and the Financial Ombudsman Service and the Financial Services Compensation Scheme.
The so-called ‘advice gap’ is one of the biggest issues in financial services today. Since the introduction of the Retail Distribution Review, all investment and pension advisers have had to be remunerated via fees, with commission payments banned. The need to stay profitable has led many advisers to turn away clients who do not enjoy a certain level of income and/or assets. High street banks and product providers, who have traditionally serviced the mass market, have in many cases ceased to offer advice. All efforts to date to introduce some form of simplified advice regime have failed. Nevertheless, the terms of reference of the Review promise to “facilitate the establishment of a broad based market for the provision of financial advice to all consumers.”
Tracey McDermott, who will shortly become Acting CEO of the FCA, will co-chair the review with Charles Roxburgh, Director General of Financial Services at HM Treasury. An advisory panel of up to 15 representatives of consumer groups, product providers and financial advisers will be headed by Nick Prettejohn, the Chairman of Scottish Widows Group.
Ms McDermott commented:
“Ensuring that people have the appropriate information and advice in order to make important financial decisions is a priority for the FCA. Changes in the rules around mortgages and the introduction of the new pension freedoms mean that more people than ever before are looking for or are in need of financial advice. The review is an opportunity to look at how the market is working right across the piece and has the potential to radically change the advice landscape to the benefit of both firms and consumers.”
The Economic Secretary to the Treasury, Harriett Baldwin MP, said:
“Making sure that our financial services sector supports working people at every stage of their lives is a key part of our long term plan. That’s why we’ve launched a major new review to explore what more can be done to make sure consumers can access high quality and affordable advice so they can make informed decisions with their hard-earned money.”
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.