Out-Law News 2 min. read

Treasury and FCA launch consultation on financial advice


The UK Treasury and the Financial Conduct Authority have launched a joint consultation to look at ways of improving access to financial advice for consumers.

The consultation is the first step in the Financial Advice Market Review (FAMR), which was launched in August to look at how financial advice regulation could be improved, the FCA said in a statement.

The consultation aims to find out what financial advice consumers are actually looking for, and any gaps between this and what they can access and afford. It will look at how these gaps can be closed, and at what role 'robo-advice' has to play in improving access to information.

Robo-advice is a term that arose in the US to describe computer algorithms that offer financial advice. It involves automating most of the delivery of information about financial product selection to consumers online.

Last week life assurer Partnership’s chief executive Steve Groves told a financial planning conference in Wales that the FCA is set to give the 'green light' to robo-advice after the review, the Financial Times said.

"I think the FCA review is going to lead to what I call robo-guidance - I know people call it robo-advice (but) I do not think it is advice. I think it is a form of guidance. I think the FCA is for allowing that to happen in the coming years," Grooves said, according to the newspaper.

The review will also look at what barriers consumers face in seeking advice, and the value they place on that, as well as at the regulatory framework around advice and the role of the Financial Ombudsman Service and the Financial services Compensation Scheme.

Insurance expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law.com said: "The FAMR is a recognition of the continuing problem of obtaining – and providing – affordable advice or other help to so-called mass-market investors. What is exciting about this new review is the involvement of both the regulator and the Treasury, opening the door to potential change in the UK legislation that appeared to hamper the FCA’s recent review. FAMR does represent an opportunity to refine some of the rules and guidance on financial advice to cope with the new kind of services made possible by technological advances."

"This review is unlikely to bring a return to the old-fashioned world of sales-driven advice models. The regulator and the industry as a whole have moved on in an environment that is more focused on principles-based regulation and 'treating customers fairly' (TCF) and the consultation is careful to focus on consumer needs before asking questions on the economics of providing advice," he said.

TCF is a set of principles developed by the FCA to encourage good behaviour towards consumers.

"The long list of questions supports the Treasury's initial proposal of a broad scope exercise to gather evidence and it will be some time before the full results of this review become clear.  With the political will that is driving this consultation, advice firms and product providers will not have a better chance to put forward their views on how to change the advice framework to serve a wider range of customers - and perhaps plug the infamous advice gap," Ashby said.

The advice gap is a term used in the FAMR terms of reference when setting out its aim to encourage a "healthy demand side for financial advice" and to address the barriers preventing customers looking for advice.

Economic secretary to the Treasury Harriett Baldwin said: "Helping hard-working people achieve their aspirations at every stage of their lives is at the heart of our long term plan."

"A key part of that is making sure that people can access high quality, affordable, tailored advice and guidance to help them make informed financial decisions, whether that is saving for their first home, taking out a mortgage, buying a car, or saving and investing for the future," she said.

The consultation will be open until 22 December, and a final report will be published ahead of Budget 2016.

A separate consultation will be held on the role of publicly-funded guidance, including Pension Wise and the Money Advice Service.

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