FCA to develop new definitions of advice and guidance
Last week the Financial Conduct Authority (FCA) announced a Financial Advice Market Review (FAMR) working group to deliver on three specific projects before the close of 2016. The group is compiled of 15 financial services experts from consumer organisations, different types of product providers and advisers. Eight of these experts were part of the original FAMR team which will report to the regulator’s board and Harriet Baldwin, Economic Secretary to the Treasury, after completing the initial 12 months of activity. The three projects will:
Develop: new definitions of advice and guidance
Design: a set of rules to increase consumer engagement
Produce: a guide for the top 10 ways to support employees’ financial health
FAMR produced 28 recommendations when it was published in March. The review is a joint venture between the Treasury and the Regulator and is designed to develop recommendations to plug the advice gap. The end game is to deliver affordable and accessible financial guidance to everyone, specifically those who had historically relied on the now banned product commission to cover the cost of their financial advice needs.
Individuals with less than £100,000 of investable assets account for 16 million consumers in the UK. FAMR has been tasked with ensuring that this, by no means small proportion of the population, does not end up in a situation whereby their financial advice needs cannot be serviced in line with affordability, as well as ensuring that the definitions of regulated financial advice are clearly defined from the outset. Section four of the FAMR’s colossal 85 page final report stated: “HM Treasury should consult on amending the definition of regulated advice so that regulated advice is based upon a personal recommendation.” The suggested terms outlined in full below, will provide an initial outline for the expert group to develop.
Plans announced by the Government in The Budget March 2016 to merge Pension Wise and The Pensions Advisory Service (TPAS) to create a new pension guidance body as well as the closure of the Money Advice Service (MAS) are currently underway. Legislative changes for that project expected to take six to 12 months.
With the projected delivery dates of both projects scheduled for delivery at similar times, it must be expected that the outcomes of the FAMR working group’s projects will feed nicely into the newly created pensions guidance body currently scheduled to launch in 2018.
From an adviser perspective, we hope the outcome of both projects deliver to the consumer a resounding confidence in regulated financial advice, as well as a comprehensive understanding of the alternative options available.