FCA plans to create 'separate, simplified financial advice regime'

The FCA has announced new proposals to widen access to financial advice under a new “separate, simplified financial advice regime”, making it cheaper and easier for firms to advise consumers about investments.

The regulator noted that excessive cash holdings can be eroded by current high inflation, whereas investing could yield better results for informed investors. It says the regime would make it easier for consumers to get advice on mainstream investing within stocks and shares ISAs.

Proposals for how this could be achieved include streamlining the ‘fact find’ so advice is more straightforward for both firms and customers, and limiting the range of investments within the new regime so the advice is "easier to deliver and understand".

Other plans include allowing advice fees to be paid in instalments and making the qualification requirements for the new regime more proportionate so delivering the simplified advice is less costly for firms.

The proposals follow a recent FCA survey which found that 4.2 million Brits have more than £10,000 in cash and are open to investing at least some of it.

The consultation on broadening access to financial advice for mainstream investments runs until 28 February 2023.

Sarah Pritchard, executive director of markets at the FCA, said: “Now more than ever, people across the UK should have access to useful and affordable financial products and services which can improve their quality of life and support the economy.

“These proposals are part of our work to deliver a consumer investment market where people can readily access support and firms aren’t deterred from providing it.”

Prakash Chandramohan, strategy director at TISA, commented: “We welcome the FCA’s efforts to open up more mass market support for consumers. Helping people with more affordable advice and personalised guidance will allow them to make informed decisions that best serve their interests and to make the most of their savings.

“The FCA has been constrained by the legislative framework, which means the proposals will not solve the consumer disengagement problem that lies at the heart of this issue.

“Simplified advice needs legislative change and to sit alongside Harriett Baldwin MP’s tabled amendment to the Financial Services and Markets Bill or similar, legislative solutions. In these economically turbulent times, consumers need focused and effective help from financial services providers, and only a concerted, combined regulatory and legislative effort can deliver on it.

“At TISA, we are pleased with initiatives like Harriett Baldwin MP’s that are prompting the Government to look at solutions for consumers. Government has the opportunity in the next few years to put in place the right foundations to help consumers rebuild their financial resilience for when this crisis is over. We are ready to work with them to achieve that.”

Steven Cameron, pensions director at Aegon, added: “The latest FCA Consultation on ‘Broadening access to financial advice for mainstream investments’ is welcome recognition that something needs to change to address the support gap the current ‘regulated advice’ definition creates. The focus at this stage is relatively narrow – supporting individuals who might benefit from investing their ‘excess cash’ savings into a stocks and shares ISA. Financial adviser firms are likely to have more interest in the promised holistic review of the advice / guidance boundary which could open up a far wider range of new services to a broader range of customers.

“We also hope the FCA will consider these proposals alongside the concept of more personalised financial guidance, as tabled by Harriet Harman MP.

“The consultation, originally expected at the start of 2022, comes after an interesting year for assessing the relative attractions of cash versus stocks and shares. It’s hard to predict where interest rates, stock markets and inflation will be by the time this regime goes live.

“These proposals also need assessed through the extra lens of the new Consumer Duty, which receives 36 mentions within the consultation. Any firm considering introducing the new service will want to be absolutely sure it will deliver good outcomes and avoid foreseeable harm. With a maximum investment of £20,000, the cost of simplified advice whether or not spread, will be a major consideration when assessing value. There is also a big question over how to provide ongoing support for those who through investment growth or year-on-year investments exceed the £20k limit, excluding themselves from the new simplified advice service in future.”