The Financial Conduct Authority (FCA) has announced that it is to review two of its recent initiatives: the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).
The FCA’s main objective is to determine whether these schemes have been successful in achieving their objectives. The regulator is now seeking feedback via a Call For Input exercise, and interested parties are asked to make their views known to the FCA by June 3 at the latest. The FCA will also host a number of stakeholder events and collect further data through consumer research and a survey of a small number of firms, before publishing its final report in 2020.
The RDR, launched in 2012, required financial advisers to pass an appropriate Level 4 examination, and also banned the payment of commission on pension and investment advice.
The FAMR was a joint 2016 initiative between the FCA and the Treasury, looking at how public access to financial advice could be improved. Its recommendations included:
- The FCA should assist firms who wish to develop a streamlined advice service whilst still remaining compliant
- The FCA should consider extending the time for which a trainee adviser can work under supervision before needing to obtain a Level 4 qualification
- The FCA should work with firms to explore ways that suitability reports can be made more concise
- The FCA should establish an Advice Unit to assist firms wishing to develop automated advice models
- The Treasury should consider allowing consumers to access some of their retirement savings in order to pay for advice on their retirement options
- The Treasury should assist the pensions sector in developing a pensions dashboard so each consumer can see all of their existing retirement provisions in one place
- The FCA should consider reviewing the availability of professional indemnity insurance for smaller firms
- The Financial Ombudsman Service should hold regular roundtables on best practice with firms and their trade bodies
Some of the issues to be explored in this review include:
- How do different consumer groups access financial advice and guidance?
- What barriers to accessing advice and guidance still exist?
- How do consumers shop around when accessing advice and guidance?
- What is preventing firms and other bodies from making advice and guidance more affordable?
- Do consumers trust the different sources of advice and guidance?
- Do those receiving advice and/or guidance receive better outcomes than those who do not?
- What new models of delivering advice and guidance are being developed, and will they meet consumer needs?
- Is there effective competition between different providers of advice and guidance?
- Has the RDR and/or the FAMR caused unintended consumer harm?
- Given that it is a few years since the launch of the two initiatives, how have consumer needs around advice and guidance changed in recent years?
- What are the likely future trends and emerging consumer risks?
Christopher Woolard, Executive Director of Strategy and Competition at the FCA said:
“Millions of people look for help and support in making financial decisions every year and the aim of the RDR and FAMR was to help the market develop the right advice or guidance service consumers need to make those decisions.
“Consumers and the market are changing rapidly, as technology, employment patterns and inter-generational challenges change the way consumers interact with financial services. As well as looking at how the market has evolved since RDR and FAMR, it’s important that our work looks ahead to see how we ensure that this important sector works well in the future. We want the market to deliver a range of good quality, affordable advice and guidance services that meet consumer needs.”
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