A group of Berkshire IFAs who meet on a monthly basis to discuss issues effecting the industry, have just formulated their FAMR response.
The group looked at the five questions provided by the FCA on FAMR and provided each with a response. The group’s spokesperson is IFA Geoff Mason of Geoff Mason Associates.
- The extent and causes of the advice gap for those people who do not have significant wealth or income.
The group noted that RDR has increased all associated costs of advice, which has resulted in closure of advice channels and fewer advisers. However, interpretation of regulation was unclear creating known unknowns. Also, wealthier clients had until RDR subsidised advice to the less well off. The group also said that advice had until RDR been considered by those seeking it as ‘free’. And, mass affluent are now discouraged by the idea of having to pay fees and find it hard to value advice when the benefit of the advice may be years ahead.
- The regulatory or other barriers firms may face in giving advice and how to overcome them.
The group said that regulatory rules require a great deal of effort to understand and explain. Far too much time is spent generating suitability reports, that the majority of clients do not read, often fear and certainly only file. Furthermore, that product information and documentation is far too lengthy, drowning the clients in order to ‘protect’ them; having confused first them. Simpler rules and regulation is needed along with simpler products.
– claims management firms who market alarming headlines, fail to assist the claimant with valid claims and instead creates an open ended liability;
– the costs of an advice business are not known at the outset of the year. The FSCS can and do significantly increase costs and levies over which advisers have no control or influence;
– exiting firms reduce the pool from which these and levies may be requested and the cost therefore increases further, until there are no adviser businesses remaining. The funding of the FSCS needs a fundamental rethink.
– consumers often don’t know where to go to get financial advice, the regulator should have a clear register of advisers for consumers and what they do possibly linking to money advice register.
– clients don’t know the value of advice or what sort of advice they are looking for.
- How to give firms the regulatory clarity and create the right environment for them to innovate and grow
As regards the media, the group said that they currently link financial advice firms with pension companies and the banks, and the bad news sticks to the wrong sector. The industry must try to educate the media.
Lower risk products and specify who/which type of client the products may be sold to, as overseen by independent due diligence provider. Better guidance on insistent client versus best interest rules. Currently the rules put the adviser on an uneven playing field. One adviser confirms inappropriate advice, another may have a different motivation and end up with a claim on the FSCS. And, introduce a long stop on liabilities.
- The opportunities and challenges presented by new and emerging technologies to provide cost effective, efficient and user friendly advice services.
On the subject of Robo advice, it has the potential to help fill advice gap but consumers MUST not sign away their consumer protection rights. If its advice the consumer must be protected, otherwise it isn’t advice, it is guidance. Older generation may struggle with technology.
- How to encourage a healthy demand for financial advice, including addressing barriers which put consumers off seeking advice
Here the group outlined five key thoughts:
– education in schools;
– publicity for the benefit of advice and the good news associated with planning.
– bring back consumer choice as to how advice is paid for, either through product or a fee from the client.
– simplify the products and the regulation.
– promote transparency of the product apply a guide like Total Expense Ratio (T.E.R.), similar to APR in the credit market.