The financial advice market review (FAMR) was launched this summer by the Treasury and the Financial Conduct Authority (FCA). According to the Treasury its primary function will be to look at how to make advice accessible to those people who want to “work hard, do the right thing and get on in life but do not have significant wealth”. The report is to be published ahead of the 2016 budget.
The review is an astoundingly late response to the pensions freedom reforms that were unexpectedly announced in the 2014 budget two years earlier. Surely such a report should have taken place well ahead of such a monumental change to pensions access? The review will also:
Ensure the regulatory and legislative environment allows and encourages firms to innovate and grow their business models to include affordable accessible advice.
Consider ways to encourage people to seek financial advice, addressing unnecessary barriers that currently deter them.
Exactly how the regulatory environment is addressed will undoubtedly be the key to eliminating the barriers to advice for those who have been priced out of the market. Currently clients need to meet specific wealth requirements in order for financial advice firms to survive within the current restrictions of regulation. The outcome of FAMR needs to ensure that financial advice is accessible to all wealth and income groups.
The former pensions minister Steve Webb recently admitted that perhaps the money that was spent on Pensions Wise, designed to assist retirees with decisions relating to pensions freedom, could have been better spent on a different initiative. Such an initiative could be, for instance, a voucher system enabling consumers to see an actual IFA. Post analysis of Pensions Wise has illustrated that users of Pension Wise guidance have been put off moving onto regulated advice because it was too expensive.
Thankfully, this act-first-and-review- the- consequences later mentality within financial advice is changing, with experts in the sector now being asked to provide informed opinion for review ahead of monumental change. A good example of this is the Green Paper on pension tax relief which was issued in the summer budget, the results of which will not be announced until The Budget 2016.
Clearly, the results of the FAMR would have been more beneficial ahead of the retail distribution review and pensions freedom changes. Regardless of this, the review will hopefully gather the right insight from industry insiders to allow common-sense to prevail by reducing the burden of regulation to make way for access to financial advice for all.