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FCA opens door to 'financial guidance' for millions
The FCA is planning to open the door to millions of consumers receiving ‘financial guidance’ on their personal finances which stops short of regulated financial advice.
The regulator says its new proposals, published today in DP23/5, will give many more people the ability to receive 'simplified advice' on their investments and pensions.
Guidance providers will be able to give savers tips and ideas on how to invest their money but must not provide personalised advice.
The FCA said its proposals to relax the strict boundary between advice and guidance would provide "greater support" for people's financial decisions.
The FCA and Government are seeking views, as part of the joint Advice Guidance Boundary Review, on three proposals including:
• Further clarifying when firms can give consumers support without giving regulated financial advice
• An "innovative new approach" allowing 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 proposals, floated in the past, have raised concerned among some advisers that ‘watered down’ financial advice would create more problems than it solves.
The FCA said it was acting to help bridge the advice gap. Its Financial Lives survey found that only 8% of UK consumers received full financial advice in 2022. It said many people may struggle to make the right choice on saving and investing without help.
The FCA said today that its proposals were 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.
The watchdog plans to work “side by side” with industry and consumer groups on developing the proposals. The aim is to open up the market to a wider range of advice and support, while supporting the UK investments market to thrive.
Bim Afolami, Economic Secretary to the Treasury, said: “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.'
Sarah Pritchard, executive director of markets and international at the FCA, said: “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.
“This review will help us produce new rules to deliver this important step change for industry and consumers. It’s important we get this right and we welcome feedback on whether the proposals are right for consumers and for businesses.'
The move has been greeted positively by some industry experts.
Andrew Tully, technical services director at Nucleus said: “Giving more people the chance to access the support they need to make their money work harder is a step in the right direction.
“We are big supporters of advice and know just how much it can help people achieve good outcomes. The proposals from the FCA and government could encourage millions more to save for their future and as their needs become more complex create further opportunities for advisers.”
He added that the move could help bridge the “planning gap” and courage more people to have higher retirement confidence.
Wealth management trade body PIMFA also welcomed the FCA proposals for improving access to financial advice for potentially millions of consumers.
Simon Harrington, head of public affairs at PIMFA, said: “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.
“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. It is vital that firms feel empowered to provide support without the concern of being seen to provide financial advice and we are hopeful that this will manifest itself in a manner that consumers derive value and meaning from being told what people like them would do in similar circumstances.
“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. We will continue to work closely with both parties on this review in the spirit of the welcome practitioner led approach that the review has been conducted in up to this point.”
Alastair Black, head of savings policy at Abrdn, said: “We welcome today’s news, Christmas hasn’t come early but it feels like the start of a real shift in the regulatory environment which will allow advisers and providers to help more customers.
“The two key proposals are targeted support (effectively guidance plus) and simplified advice. We are pleased to see the Government trying to address both sides of the gap. We will look to support our key adviser business partners and the Government in developing these proposals to maximise their chance of success.
“We were also pleased to see the Government mention the need for the simplified advice regime to avoid having to take into account consumer’s wider financial circumstances (allowing the advice to be targeted). If effective, this will maximise the chance of advice firms keeping costs for their clients down and growing capacity which benefits all. Ultimately the long-term goal needs to focus on a commercially viable simplified advice regime to help the masses in retirement. This is where the greatest need is. It doesn’t look like these proposals address that but they feel like a step in the right direction.”
• Advice Guidance Boundary Review - proposals for closing the advice gap.
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