Simplified Financial Advice Back On Again

The government, Bank of England and the Financial Conduct Authority (FCA) have long battled with the problem of the financial ‘advice gap’.  This is where some people can afford to pay for financial advice, but millions of lower income families cannot afford to get financial advice meaning their wealth, albeit smaller, may not be working as hard for them as it should be.

The Problem for Financial Advisers

Financial services is one of the only industry in the UK that is not subject to Consumer Limitations.  There is no 6-year rule and financial advisers have an open ended for life for the financial advice that they give.  This means that financial advisers cannot afford to offer lower cost financial advice when the liability is huge and yearly insurance premiums run into the tens of thousands for smaller adviser firms and hundreds if not millions of £ for larger firms.

Simplified Advice/Guidance

Many financial advisers and wider public lobby groups have campaigned to have structures in place to enable simplified guidance rather than regulated advice and cut the liability for advisers making it more affordable and accessible for lower income/wealth consumers.

The issue is the boundary between advice and guidance is blurred.  It is a grey area and needs to be defined correctly to enable advisers to develop services and breach the advice gap.

FCA Proposals

The FCA has three proposals that they wil now consult with the industry on:

• Clarifying the Boundary: Explore further guidance for firms to enable greater financial guidance when an adviser is getting close to the boundary actually giving regulated financial advice.
• Targeted Support:  Allowing firms to offer tailored support to people from similar groups, organisations or in similar positions.  This may involve steering people to certain types of product or solutions without specifically recommending a named product or service.  This would dramatically reduce the liability and therefore the fees charged by advisers whilst given consumers a huge steer, view or opinion on their current position and how better to plan or improve both current and future financial provisions rather than personalised advice.
• Simplified Advice: make it easier to deliver simplified, low-cost advice without the ongoing liability that currently hamper advisers and their insurers with a new set of rules for simplified advice.

Comment

At this stage, the FCA admits these are very much ‘high level’ proposals, so much more will be needed before advisers can offer cheap low cost advice and when we are then able to launch our ‘robo adviser’ that has been waiting in the wings for a few years now.