It has clearly been quite a hardworking run in to Christmas at the FCA. Following on from polluter pays, likely the big one for most advisers and the latest version of a sustainable fund labels regime, we now get the big moves on the advice/guidance boundary.
All three papers bring a huge amount of regulatory change, some direct, some indirect. At times, it can be forgotten just how much regulation defines the nature, shape and size of the advice sector and this is, of course, the FCA and Treasury proposing to directly shift the boundary.
PA’s piece is probably the best summation of what are actually three proposals so we mosty quote them below.
1. The ‘further clarifying the boundary' proposal will explore whether further guidance or simplifying existing guidance would help firms provide consumers with greater levels of support by giving them more confidence to operate closer to the boundary.
The most cynical interpretation is that this was tried with FAMR, but advisers and others remain worried about straying into advice and, as always, potential liabilities.
Cross reference that with the ‘polluter pays proposal’ and although the regulator may think the details are different with polluter pays mostly about things like DB transfers, the mood music is simply not conducive.
You may, in the past, have heard me suggest a need for holistic regulation, because it simply doesn’t all join up. (The FAMR took place just as another part of the FCA pushed up the FOS limits dramatically but it' very hard for the FCA to acknowledge this).
2. The second proposal ‘targeted support' will allow firms to provide support tailored to groups of people in similar circumstances and enable firms to broaden the support they can provide to consumers.
PA reports that this could be offered without explicit charges, based on limited information, and would enable firms to suggest products or courses of action based on a target market the consumer has been identified as belonging to, rather than fully individualised support.
Money Marketing hones in on the pension aspect of this proposal.
It reports: “For instance, with the targeted support proposal, an advice firm could describe to a consumer the different methods of accessing their pension available when they access their pension savings for the first time.
“Based on a “limited number of questions”, the firm could then identify a product that aligns with the customer’s answers.”
Interesting too, that New Model Adviser sees this as a revival of a cross subsidy in between advice and guidance. The FCA and indeed FSA have done everything in their power to remove as much cross-subsidy as possible from advice market practice so it is quite a turn about.
In terms of the above, it is possible to see the justification – there are a lot of very poor retirement decisions being made by those who cannot afford full advice currently. You can also see how some may see ways in which this could be abused. It puts a lot of onus on a target market. Can that regulatory tool carry all that weight given this is clearly and definitely a recommendation, firmly on the advice side of the border at present.
3. The ‘simplified advice' proposal sees the regulator set a new form of simplified advice that makes it easier for firms to provide affordable personal recommendations.
The last could conceivably allow not only advisers but perhaps some of the direct platforms and even consumer brand insurers to expand their services although these potential lower value customers and clients remain just that.
The government wants a lot more people to invest. There are clearly still huge sums in cash. But again is this the way?
More generally, there are a lot of welcomes and fewer ‘cautious welcomes’ (code for we don't really like this) in the official company responses.
But FTAdviser does carry one warning from someone strongly associated with the adviser interests if not an adviser himself.
The FTRC’s founder Ian McKenna says: “it’s crucial they don’t dilute the advice boundary too far.
“Currently, it’s far too easy for non-advised services to present themselves to look exactly like advice, but without providing the customer protection of a fully regulated service.
“We stress the importance of a clear and unambiguous health warning.”
One final point. It is surely rather remarkable that the Treasury and FCA are saying this is early and high-level thinking. By my count, it’s been nearly two decades of debate, discussion and proposals.