In a bid to speed up innovation across the financial advice sector, last week the Financial Conduct Authority (FCA) launched an ‘advice unit’ to help advisers quicken the process of bringing robo-advice to market.
To be considered eligible, advice firms will need to produce a clear proposal outlining the consumer journey, and how regulations may apply as well as prove that the offering will
Provide: accessible low cost financial advice to unserved or underserved consumers
Offer: genuine consumer benefit
Deliver: a fully automated advice proposition
Focus: on the sectors identified by the Financial Advice Market Review (FAMR)
Demonstrate: a genuine need for regulatory input
Firms approved for the ‘advice unit’ will benefit from a speedier route to market. Successful applicants will be helped to meet the regulatory requirements for their automated advice offering, thereby removing any potential blockers standing in the way of FCA authorisation.
Firms will receive feedback on product development at face-to-face meetings and will also be allocated a dedicated point of contact at the FCA who will be on hand to discuss the regulatory implications of the proposed models.
The regulator intends to publish industry-wide feedback on the scheme via regular anonymous reports which will outline key findings emanating from the advice unit’s work with specific firms.
Robo-advice has been heralded as the saviour to an advice gap that became prominent following the implementation of the retail distribution review (RDR). RDR put an end to product commission which had previously been used by advisers and consumers as a means of delivering and receiving advice. The change in the rules led to a situation in which many hundreds of consumers were unable to access financial advice.
Delivering low cost advice services to the mass market via robo-advice will eventually provide advisers with new business opportunities. The benefits of the FCA’s help will undoubtedly be worth the effort involved by those putting themselves forward for the scheme. The advice sector should embrace any offers of help to innovate and ultimately to deliver a more diverse set of options, which in turn will lead to better outcomes for the consumer.