The findings of the second PIMFA Regulatory Insights Tracker, a regular survey of its member firms across the wealth management and financial advice sector, highlight a sector taking a measured and evolving approach to new regulatory initiatives, while reporting early signs of easing regulatory pressure.
Key findings show that 63% of wealth management and financial advice firms are not planning to offer Targeted Support services, with only a small number planning to offer them from April.
The findings also show tentative signs that the regulatory burden is easing. While over three-quarters (78%) of firms report that regulatory change is diverting time and resources away from other priorities to a moderate or large extent, this is down from 85% six months ago.
Measured early adoption
Alongside the findings for Targeted Support, firms share a similar sentiment towards Simplified Advice services, with almost half (45%) currently having no intention of offering it at this time. As firms recognise the importance of these reforms, these findings indicate that both Targeted Support and Simplified Advice are at a very early stage of sector adoption.
However, over a third (36%) of firms said they are awaiting further details on how the Simplified Advice regime will operate before deciding whether to offer it. This approach reflects the importance firms place on ensuring these regimes are implemented in a way that complements the delivery of holistic financial advice.
Four in ten firms (40%) agree that Targeted Support will play a significant role in helping retail investors make better financial decisions, with only 4% disagreeing and the majority (57%) reserving judgment. Likewise, nearly a third (31%) agree that the regime will set savers and investors on a pathway towards holistic financial advice, with just 18% disagreeing, while 52% offered no strong view; further evidence of a ‘wait and see’ approach.
Early signs of an easing regulatory burden
Alongside a fall in firms reporting regulatory change diverting time and resources away from other priorities, the proportion of firms reporting that their compliance expenditure has increased over the past year has fallen from 79% six months ago to 65% today. Notably, the proportion of firms reporting a significant increase in compliance costs has fallen sharply from 31% to 13%.
In terms of where regulatory efforts are being spent, Consumer Duty continues to dominate compliance activity, with two-thirds (66%) saying it is the requirement demanding the single most time and attention, although this is down from 85% six months ago. Elsewhere, the proportion of firms citing Customer Vulnerability as a major issue has fallen from 52% to 34%, following a concerted sector effort to raise awareness, while Operational Resilience and Cyber Security have risen from 13% to 25%.
Encouragingly, 82% of firms believe the regulatory changes they are working on will deliver significant long-term benefits for both their firm and clients. However, a growing proportion of firms (56%) say they do not feel clearer about how to remain compliant than they did last year, up from 46%, highlighting a continued need for clearer and more consistent regulatory communication.
Alongside this, firms continue to call for simplified reporting and reduced duplication of regulatory returns (cited by 52% of firms), while four in ten firms (39%) say setting up more realistic timelines for new rules should be a priority for regulators.
Commenting on the findings, David Ostojitsch, Director of Government Relations and Policy at PIMFA, said: “Our latest Regulatory Insights Tracker reveals signs of movement in the right direction on the overall regulatory burden on firms. It is particularly pleasing to see that, for many, regulatory change is beginning to consume fewer resources, which recognises the work of the Regulator and other bodies in reducing this burden.
“It is also pleasing to see the findings regarding Customer Vulnerability, where PIMFA and its members have made significant progress over the last 18 months in sharing best practices and practical examples to support clients and the sector. That said, the overall survey findings still show that more can be done to support firms as they navigate regulatory change and drive UK growth.
“The findings on Targeted Support reflect our engagement with firms and the Regulator, and, while uptake may be limited in our sector, there is clear support for measures that help close the advice gap and improve consumer outcomes. Simplified Advice is therefore likely to be more relevant for many firms alongside holistic advice, as the results show. With proposals now published, focus will turn to building understanding with firms and the Regulator to assess how effectively they can support client outcomes and enable firms to grow.”
*note that the survey was conducted prior to the publication of the FCA’s consultation on Simplifying the Advice Rules.
