We have all heard the phrase: “Insanity is doing the same thing over and over again and expecting different results.”
Perhaps this is a little unfair as a comment on the Treasury’s and Financial Conduct Authority's advice-guidance boundary review.
I cannot think of any reason why anyone would argue against doing something tangible to make it feasible for more people in the UK to get help with their finances to achieve a more secure financial future. But the FCA has had many fruitless attempts at this before.
How many versions of simplified advice have we had? There are at least three, not counting streamlined advice.
History tells us that many across the retail investment sector who are contemplating the avenues that may emerge for widening access to this assistance, and keenly awaiting what the regulator comes up with post-review, are in for a long wait and ultimately disappointment.
Furthermore, the regulatory landscape is more difficult than it was. With the introduction of consumer duty requirements, the FCA has boxed itself into a corner.
Can the FCA justify suggesting that it is in consumers’ interests for firms to ignore information available, via the data they hold on customers, to give them simplified advice and tailored guidance?
I have some thoughts of my own to share, but first, it's worth recalling the three aspects the FCA says it will be focusing on.
First, the regulator wants to communicate more clearly to the market the instances when financial firms can support consumers without straying into providing regulated financial advice.
Second, the FCA wants to create a new approach that will allow advice firms to offer support tailored to groups of people who share similar circumstances, based on ‘people like you’.
And third, despite a previous initiative that failed to take off, they are also looking into developing a new variant of simplified advice that will make it easier for firms to give their clients affordable personal recommendations.
Like me, more than a few advice professionals do not believe adjusting the boundary will actually close the gap. There are numerous concerns.
Firstly it is not profitable for firms to deliver a full-fat advice package to clients with lower investable assets, and, in any case, there are not enough qualified advisers and planners to deliver traditional advice to a larger swathe of the population than already receive it.
We are unlikely to see anything tangible from the FCA until 2026 at the very earliest. While we wait for the FCA to herald a new paradigm of advice and guidance, assuming then it is a solution to the advice gap, which is a big assumption, I would like to posit that there’s a practical way to proceed that can make a big difference.
