With the FCA’s Advice Guidance Boundary Review policy paper being released, Jenny Davidson, commercial proposition director at Quilter has commented. Jenny’s comment can be seen below:
Regulators have been grappling with the advice gap – which is really a ‘help gap’ – since the Retail Distribution Review largely removed mass market bank advice. Today’s proposals aim to address this. The introduction of pension freedoms in 2015 also put greater onus on the individual to make critical decisions about their retirement funds, making the need for easily accessible help even greater.
The introduction of the Consumer Duty means financial services firms need to think about ways that they can get closer to the advice/guidance boundary where they can demonstrate it would help to avoid foreseeable harm. But many firms are still nervous about the perception that FOS interpretation can diverge from regulatory intention. It needs a concerted effort between industry and regulators to really drive change and give firms reassurance through clear advice/guidance boundaries and regulatory frameworks set up specifically for lighter forms of advice or enhanced forms of guidance.
There is space for more sensible product guidance that is not based on personal information but utilises data on how the majority of people use certain financial products. The FCA’s commitment to explore the idea of ‘people like you’ nudges for non-advised savers is a good idea that could be critical to helping people avoid the kinds of choices that could be catastrophic for their later life finances. However, forms of ‘personalised guidance’, which has been previously suggested but are not in the FCA’s paper, would likely be a step too far and risk consumers misunderstanding what they are receiving, and a lack of clarity as to who is responsible for the decision.
At the same time, the financial advice and wealth management sector needs to work with the regulator to really shape what an effective and commercially viable model of simplified advice looks like so that more people see investing for their future as a viable option. The regulator is right to exclude decumulation products, which involve the kinds of decision requiring full advice.
A change in definition away from the rigid interpretation of the term ‘personal recommendation’ under MIFID is also essential and it’s reassuring to see the FCA raises this point. While we recognise the importance of a defined boundary between advice and guidance, this interpretation has resulted in a difficulty in the provision of focused help in the face of clearly harmful client decisions, potentially limiting the scope of aid firms can offer customers.
In the cases where a customer strays far from the norm, a provider should be able to suggest they make sure they are aware of the ramifications of their actions. This could help prevent foreseeable harm – a central tenet of the Consumer Duty.
While we firmly stand behind the existing distinction between advice and guidance, we welcome a broader scope to better meet the escalating demand for accurate and educational help for consumers. We want to work to optimise the use of product guidance and advice, but without blurring the crucial distinction between the two.