The Financial Conduct Authority (FCA) recently published a speech given back in May 2016 by Christopher Woolard, its Director of Strategy and Competition, on the subject of access to financial services.
Mr Woolard first addressed the issue of accessing basic banking services. He noted that the Government has announced that it will force nine banks to offer basic bank accounts, but acknowledged that some consumers may fail to satisfy banks’ normal identity verification and/or credit checking procedures.
Access to insurance was another of his concerns. The FCA director claimed that less than 50% of the poorest households in the UK have home contents insurance; and suggested this might be because they want to pay weekly premiums, or only need a low level of cover or a low excess; and that insurers were not catering for these needs.
Next, he mentioned that technological advances had improved access to financial services for many consumers, but that technological advances also risked leaving some people worse off in this respect, for example 14% of UK households still have no internet access.
At the same time as Mr Woolard gave his speech, the FCA published an occasional paper entitled ‘Access to Financial Services in the UK’, which made reference to these barriers to access, and suggested possible remedies.
In response to these challenges, he mentioned two initiatives the FCA has been involved in: the Financial Advice Market Review, and its February 2016 discussion paper on the subject of the UK’s ageing population.
The aims of the Review are:
• 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
The Review’s recommendations included:
• 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 could carry out ‘simplified advice’ focussed on a single need area, but have been wary of how the regulator and the Financial Ombudsman Service might view the matter
• 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 discussion paper on the ageing population invited responses on a number of issues related to older people’s access to financial services, including:
• The older generation may be less technologically aware
• Insurers may restrict access to their products for older people, by imposing higher premiums or setting maximum age limits
• The lack of competition in the equity release market
• Many retirees are accessing their pension funds without taking professional advice or consulting the Pension Wise guidance service
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.