Today the FCA and the Government published their proposals as part of the joint Advice Guidance Boundary Review. The plans, if implemented, outline three main proposals to help consumers “make more informed” investment and pensions decisions by accessing lower cost, simplified advice.
The three main proposals are:
- 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, the so-called ‘people like you’ or 'targeted support' option
- 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 - advice which does not have to take all the client’s circumstances into consideration
The FCA says it wants to bridge the advice gap after its latest data showed that only 8% of UK consumers received full financial advice in 2022. It believes that relaxing the advice-guidance boundary will allow regulated firms to serve millions more people with cut-down advice or guidance.
The proposals are part of its Advice Guidance Boundary Review. If it goes ahead, the strict advice-guidance boundary currently in place would be diluted with a new set of potential scenarios where regulated firms could offer more “support” to consumers, particularly those unable afford full financial advice.
The FCA says in the case of the ‘Targeted Support’ option an FCA-authorised firm could:
- Describe to a consumer the different methods of accessing their pension available when they access their pension savings for the first time. Firms could, based on a limited number of questions, identify a product designed for the needs, characteristics and objectives of a target market that aligns with the customer’s answers
- Highlight to a customer holding excess cash in their bank account that inflation could erode the value of their savings, describe the value of investing, and suggest products based on an understanding of the customer’s target market (that is, ‘people like you’).
With the ‘Simplified Advice proposal:
- A consumer who wants the assurance of financial advice to help them invest a one-off lump sum could receive a suitability assessment and personal recommendation for how they should invest, but this may not need to take into account their full wider financial situation
- A consumer who has never reviewed the funds they are invested in could feel that their attitude to risk has changed. They would be able to approach a simplified advice firm, who review the funds and recommend alternatives suitable to them now
- The FCA will also investigate raising the limit for receiving simplified advice from investment amounts of £20,000 (the ISA limit) to £85,000 (the cap on FSCS compensation).
• The Advice Guidance Boundary Review - proposals for closing the advice gap.