Views from broker firms on proposals to bridge the financial ‘advice gap’ to improve consumer’s investment decisions are being sought by the Financial Conduct Authority and the Treasury.
The consultation is part of their joint Advice Guidance Boundary Review, first published in August.
The three proposals, which cover investment and pension decisions, are:
- Further clarifying when firms can give consumers support without giving regulated financial advice
- A new approach to allow 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 found in its July Financial Lives survey that only 8% of UK consumers received full financial advice in 2022.
It says: “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.”
Economic Secretary to the Treasury Bim Afolami adds that the move is designed to close the ‘advice gap’ that excludes people with modest investments.
Afolami says: “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.”
FCA executive director of markets and international Sarah Pritchard adds: “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.”
Wealth management trade association PIMFA welcomed the move.
PIMFA head of public affairs Simon Harrington says: “Too many people are expected to make significant financial decisions without the necessary level of personal expertise, or the right level of support to guide them.
“Clearly it would be preferable for everyone to have access to a fully qualified financial adviser but we are aware that this is both unrealistic and also uneconomical for millions of people.
Harrington points out: “With that in mind, we believe that the proposals put forward today will go some way to closing the UK’s support gap – ensuring that people are able to access targeted financial advice which is relevant to their needs.
“In order for these proposals to be successful, it is vital that they are both commercially viable for firms as well as ensuring that consumers are guided towards good outcomes for them, rather than the firm guiding them.”
Hargreaves Lansdown financial advice and guidance director Richard Caldicott adds: “Opportunities to nudge people to become more engaged with their money will make a real difference.
“As will clearer guidance as people start out on their investing journey. Driving better outcomes for savers and investors is at the heart of these reforms.
“There remains a strong role for full financial advice and we will examine the proposals on simplified advice to see if they would assist a wider group of consumers.”
The deadline for feedback on the FCA and Treasury proposals is 28 February 2024.
