There’s to be a major review of how people access financial advice.
It’s being launched by HM Treasury and the Financial Conduct Authority (FCA).
The Financial Advice Market Review (FAMR) will look into a number of issues, including people who want to get advice, but who are not considered wealthy enough; the background regulatory and legislative environment; and, how people should be encouraged to get advice.
The review will cover insurance, mortgages, pensions and savings.
The news has generally been welcomed by the industry.
The CEO of The Institute of Financial Planning (IFP) Steve Gazzard said: “The FCA and HM Treasury continue to be focused on defining advice by product areas; in fact the Terms of Reference for the review confirms that the initial evidence gathering will request examples of problems in obtaining advice in the following markets:
- investments, savings, pensions, and retirement income products (including annuities)
- mortgages (including Help to Buy and equity release) and consumer credit
- general insurance
“We continue to see that even post-RDR the advice market consists of significant numbers of those operating on a ‘Regulated Selling of Products’ basis including some advice. These ‘selling advisers’ tend to have fees contingent on a product transaction i.e. they have a product proposition rather than an advice proposition. The way that these advisers operate is primarily on the basis of SUITABILITY.
“On the other hand there are more advisers now working on the basis of the ‘Provision of Professional Advice’ basis. These ‘professional advisers’ have an advice proposition which they charge for separate to the implementation of product. They operate acting as a FIDUCIARY for their client, understanding the inherent conflicts of interest, managing and disclosing them openly.
“Real Financial Planning is a subset of Professional Advice; the questioning, listening, presentation and coaching skills needed by Financial Planners are way beyond technical exams and, because of this, skills development is something IFP continues to focus on and deliver alongside advanced technical knowledge.
“IFP welcomes the FMAR and hopes that as a result the definition between advisers who sell suitable products and those who operate on a fiduciary basis will become clearer, and that this will enable both markets to expand to serve consumers better.”
The People’s Pension
Director of Policy and Market Engagement at The People’s Pension Darren Philp said: “The FCA’s Financial Advice Market Review is a welcome first step forward. Regulation has created an artificial divide between guidance and advice and this is a recipe for confusion. It is clear to us that advisers are between a rock and a hard place, and often cannot give the help and information that is all most consumers need.
He continued: “We know that Consumers are put off seeking advice because they have to pay for it. Government initiatives like Pension Wise can help fill a gap, but they are no substitute for making sure that those would benefit from advice are able to receive it. We would like a situation where advisers are able to add value for all those who want it, regardless of whether this is from a simple chat or a detailed financial plan.”