From the blog: The Financial Conduct Authority last week launched a review of the financial advice market, as the industry calls for greater clarity and accessibility around guidance and advice.
The review was welcomed by many in the industry, as increasing complexity from last year's 'freedom and choice' pension reforms have increased the need for financial advice.
The review launched on Monday, August 3, and will examine the gap between the free guidance offered by the Pensions Wise service and professional advice that is typically only available to more wealthy individuals.
The review was welcomed by many in the industry, as increasing complexity from last year's "freedom and choice" pension reforms have increased the need for financial advice
The review launched on Monday, August 3, and will examine the gap between the free guidance offered by the Pensions Wise service and professional advice that is typically only available to more wealthy individuals.
The formal objective is for the review to examine the following (no prizes for spotting the triplet inserted by the Conservative party communications team):
The advice gap for people who want to work hard, do the right thing and get on in life but do not have significant wealth
The regulatory or other barriers firms may face in giving advice and how to overcome them
How to give firms regulatory clarity and create the right environment for them to innovate and grow
The opportunities and challenges presented by new and emerging technologies to provide cost-effective, efficient and user-friendly advice services; and
How to encourage a healthy demand side for financial advice, including addressing barriers that put consumers off seeking advice.
Many in the industry have been warning of the risks if large numbers of savers choose not to take advice in the new pensions environment. Speaking at a briefing earlier this year, the now pensions minister (then the government’s older workers champion) Ros Altmann described the consumer advice system as “completely messed up”.
Govt and FCA launch major review of financial advice market - If it ain't broke .. oh wait a minute, yeah I get it. http://t.co/RGj2i3qg7o
— Mike Crowe (@MichaelDCrowe) August 3, 2015Clarity on advice
Darren Philp, head of policy at mastertrust the People’s Pension, welcomed the review and said clarity on advice was needed.
“What we need to do is put ourselves in the shoes of the consumer,” he said. “We have created an artificial barrier between advice and guidance. If you ask the vast majority of consumers what the difference is, they wouldn’t know.”
Philp added the function of Pension Wise should be to plug the “information gap” and signpost those who need it towards further advice and guidance.
“I don’t think something like Pension Wise could ever replace what advisers actually do.”
Steve Patterson, managing director at retirement planner Intelligent Pensions, said there was an “expectations gap” alongside the advice gap, with many consumers not understanding the services on offer or how they charged.
He added the introduction of the retail distribution review, which required financial advisers to charge up-front fees rather than accepting sales commissions from product providers, should have been a “watershed”, but not enough was done to promote good quality advice.
“We see the government’s current initiative as an attempt to break down these barriers, but must be coupled with reinforcement of the fact that commission no longer exists for investment products and if people want advice they have to pay for it.”
The review will produce a number of reforms and proposals, including principles governing the operation of financial advice – along with measures to ensure the standards are met, and proposals over whether regulations for financial advice should be amended. Proposals will be brought forward ahead of next year’s Budget.
