To improve competition and spur economic growth, the FCA is looking at overhauling the rules on the advice and guidance boundary.

Two major investment platforms, AJ Bell and Hargreaves Lansdown, have already welcomed the news although it may be a while before any change is made.

In a conference speech today at The Future of UK Financial Services Regulation Summit, FCA executive director of markets, Sarah Pritchard, said the FCA was looking at "transforming" the advice and guidance rules.

At present there are strict rules separating regulated financial advice, which must be provided by regulated financial advisers, and financial guidance - general tips and help - which can be provided by anyone.

Because of the strict rules, few providers have chosen to offer detailed financial guidance to clients which could result in a product sale for fear of falling foul of the regulated advice rules.

However, in recent years a number of providers have called for the rules to be changed to give them the chance to give clients who cannot afford regulated advice more guidance and advice about what to do with their money using online tools and AI.

Ms Pritchard pointed that when MiFID regulations, which cover the sale of investment products, were first introduced 15 years ago they had a clear distinction between advice and guidance.

She said: “Offering advice on what to invest in carries with it a heavy regulatory burden. A full suitability assessment – in effect an in-depth MoT of a customer’s personal financial situation - is needed from a qualified financial adviser.

“Because of the costs involved, only the relatively well-off can access advice on what to invest in. Mass market consumers are often left to navigate a bewilderingly large choice with little support.

“As part of the FCA’s Consumer Investments Strategy we have said that we want to establish a simplified advice regime for mainstream stocks and shares ISAs where the risks to consumers are relatively low.

“This will remove some of the burden of regulation which currently applies across the board to all advisers. It will also enable firms to reduce their charges and make advice on mainstream investments more accessible to mass-market consumers.

“Once the FCA has greater rule making powers under the future regulatory framework legislation next year, we will be able to do more.”

Ms Pritchard said to prepare for the extra powers the FCA would, “carry out a holistic review of the boundary between advice and guidance so we can understand how to reduce the regulatory burden while continuing to provide the right level of consumer protection.”

She said the weight of regulation should be “commensurate” with the level of risk but moving away from the one-size-fits-all approach mandated by MiFID will be complex and it will need assistance and input from the industry.

She added: “We are getting ready now for the greater opportunities that will exist in future to set rules that are appropriate for the UK.”

AJ Bell welcomed the FCA plans. Tom Selby, head of retirement policy at AJ Bell, said: “Those who are willing and able to pay for regulated advice are well served by the market and should be able to navigate through the current storm with a clear-minded focus on the long-term. 

“However, those who do not take advice need better, more personal guidance so they can make financial decisions which are more likely to lead to ‘good outcomes’, in line with the FCA’s Consumer Duty.”

“We welcome the FCA’s acknowledgment of this issue and urge the regulator to push forward its review at pace. A culture of fear has built around providing guidance that risks going anywhere near the blurred advice/guidance boundary, with firms and employers keeping a safe distance from the boundary and ordinary people receiving less help making decisions as a result.”

Investment provider Hargreaves Lansdown also welcomed the plans.

Anne Fairweather, head of government affairs and public policy, at Hargreaves Lansdown, said: “For a long time, Hargreaves Lansdown has recognised that the advice boundary is a barrier to our ability to guide clients towards better outcomes. 

“Whether it is pointing clients to a lower cost index tracking option or reducing the risk that clients run out of pensions savings too soon, there’s a bigger role firms can play supporting their customers. This review is a big opportunity to demonstrate how innovation and data analytics can guide people with their financial choices.” 

• Ms Pritchard also said in her speech that the FCA was aiming to speed up its approach to authorisations. It had cut its backlog for pending authorisations over the past year by 40% and is trialling automated applications forms for companies to make them easier to understand and quicker to assess.