The FAMR, conducted by the FCA and the Treasury, recommended the government narrow the definition of regulated financial advice to leave firms more scope to offer guidance to customers.
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“The package of reforms we have laid out today will help increase both the accessibility and affordability of the advice and guidance to ensure that consumers get the help they really need when they really need it”.
The FCA would help firms to develop automated or “robo” advice to guide customers through investment options using online algorithms.
As part of measures for a clearer advice framework, the review also calls for changes to time limits on qualifying as an adviser so that trainee advisers can work for up to four years under supervision to obtain an appropriate advice qualification.
The report found evidence of low awareness and uptake among consumers of free, public guidance services, and “nervousness” among firms about providing helpful support and guidance for fear of straying into providing regulated advice.
A core aim of the FCA’s proposals is to create a more clearly defined two-tier market, with “advice” on investments being subject to the full panoply of regulation, while general “guidance” would be more lightly regulated as it does not include full fact-finding about the customer.
The Financial Advice Market Review, released today, has recommended the development of a “pensions dashboard”, and allowing consumers early access to a small part of their pension pot to “redeem against the cost of pre-retirement advice”.
“This will ensure that consumers can access financial advice at a key milestone in their lives and feel confident in making financial decisions as they approach retirement”, the report said. The report also urges the government to explore ways to improve the existing income tax and National Insurance exemption for employer-arranged pension advice.
As well as the complexity of retirement planning, by giving access to pension money to pay for fees, the FCA is hoping to bridge “the advice gap” that has sprung up since the Retail Distribution Review did away with advisers getting paid by receiving commission from product providers.
It also tackled the thorny question of how to fund to the Financial Service Compensation Scheme, proposing alternative ways of doing this so financial advisers can plan ongoing costs more effectively. The Financial Advice Working Group, which will build on the work of FAMR over the next 12 months and report back to the government on its progress, should work to design a set of “nudges” and “rules of thumb”, such as those now available on the Money Advice Service (MAS) website, to encourage consumers to engage with their own financial decisions, the report said.
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“On the other hand, narrowing the definition of advice to personal recommendation will certainly be helpful for consumers”. 48% of these types of complaints were concerning advice about mortgage endowment products.
