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More people could access advice or support to help make their money work harder under proposals set out today by the Financial Conduct Authority (FCA) and the Government. The potential options aim to help more people benefit from investment opportunities, provide for later life, save for major expenses or tidy up their finances.
The FCA and Government are seeking views, as part of the joint Advice Guidance Boundary Review, on three proposals to help people make more informed investment and pensions decisions, including:
Further clarifying when firms can give consumers support without giving regulated financial advice.
An innovative new approach allowing firms to provide support tailored to groups of people in similar circumstances.
A new form of simplified advice that makes it easier for firms to provide affordable personal recommendations to clients with more straightforward needs and smaller sums to invest.
The FCA’s Financial Lives survey found that only 8% of UK consumers received full financial advice in 2022. Decisions on saving, investing and how to use their pension pots are critically important, and some may struggle to make the right choice for them without help.
Today’s proposals are an important step in examining how innovation could expand the market to new forms of advice and support, driving competition to better serve consumers, while maintaining consumer protections. Following close engagement with stakeholders to shape these initial proposals, the FCA and Government will continue to work side by side with industry and consumer groups. The aim is to open up the market to a wider range of advice and support, while supporting the UK investments market to thrive.
Bim Afolami, Economic Secretary to the Treasury, said:
'The gap between holistic financial advice that is unaffordable for many, and guidance that is free to access but not personal to the consumer, is simply too vast.
'This so-called ‘advice gap’ is excluding people with modest investments, who are looking for support that doesn’t break the bank.
'This just isn’t good enough – we have long needed a middle ground that is affordable and accessible. The policy paper that the Government and the FCA have published today will explore how we can achieve exactly that.'
Sarah Pritchard, Executive Director of Markets and International at the FCA, said:
'We want to open the door for more people to get the right advice or support to manage their money at the time they need it and at a cost they can afford. We’ve already helped firms test drive innovative solutions but we want to go further.
'This review will help us produce new rules to deliver this important step change for industry and consumers. It’s important we get this right and we welcome feedback on whether the proposals are right for consumers and for businesses.'
Notes to editors:
Read Advice Guidance Boundary Review – proposals for closing the advice gap.
In August 2023, the FCA published clarification for firms who want to support consumers more under the existing framework, without providing a personal recommendation. We received positive feedback on this document, but we recognise that broader regulatory reform might be needed.
In addition to the support which financial advice can currently offer, and the support consumers can currently receive as guidance, the Advice Guidance Boundary Review proposals could help consumers in a number of different scenarios.
For instance, with the targeted support proposal, an FCA-authorised firm could:
Describe to a consumer the different methods of accessing their pension available when they access their pension savings for the first time, and based on a limited number of questions, identify a product designed for the needs, characteristics and objectives of a target market that aligns with the customer’s answers (i.e. ‘people like you’).
Highlight to a customer holding excess cash in their bank account that inflation could erode the value of their savings, describe the value of investing, and suggest products based on an understanding of the customer’s target market (i.e. ‘people like you’).
For instance, with the simplified advice proposal:
A consumer wants the assurance of financial advice to help them invest a one-off lump sum. They receive a suitability assessment and personal recommendation for how they should invest, but this doesn’t take into account their wider financial situation.
A consumer has never reviewed the funds they are invested in. They feel that their attitude to risk has changed. They approach a simplified advice firm, who review the funds and recommend alternatives that are suitable to them now.
The FCA and Treasury are inviting feedback on the proposals by 28 February 2024.
These proposals support the FCA’s consumer investments strategy and visionfor the market which is for consumers to be able to invest with confidence. The FCA has published a 2-year update on its strategyalongside a data review of its work to tackle harm in the market in 2022/23.
To support the aim of consumers being able to invest with confidence, the FCA recently published a consultation setting out proposals for personal investment firms that give bad advice to hold capital for redress.
The FCA is running field trials to explore effective touchpoints for engaging consumers with their pension. We have published the results from the first stage of this research alongside these publications. See Research article: Testing what gets consumers engaged with their pension – and why
The Financial Advice Market Review (FAMR), which was jointly led by the Treasury and the FCA, examined how financial advice could work better for consumers.
Find out more informationabout the FCA.
https://www.fca.org.uk/news/press-re...ment-proposals
