UK financial advice review: firms urged to participate

Out-Law News | 21 Jan 2020 | 1:39 pm | 2 min. read

UK financial advisers have been urged to help shape future regulation as part of a review by the Financial Conduct Authority (FCA).

The FCA is due to publish a report on the impact of two recent regulatory initiatives, the Retail Distribution Review (RDR) and Financial Advice Market Review (FAMR), this autumn. In a recent update, the regulator said that it was particularly interested in the impact technology has had on the market and the potential for it to help meet current and future consumer needs.

Around 400 firms were recently surveyed by the FCA on their advice services, including businesses models and strategies; target customers; charging structures; future plans; and use of technology and recent innovations. The FCA is now conducting research on how consumers interact with the market, but is also keen to hear from firms about their future plans around technology and any "challenges and barriers" they are currently experiencing in doing so.

"We are particularly keen to understand the impact technology has had on the market and the potential for it to help meet current and future consumer needs," the FCA said in its update.

Ashby Tobin

Tobin Ashby

Partner

It is a few years since FAMR first started, but the questions over barriers to providing advice and guidance to mass-market customers and whether customers will use the services provided remain.

"We want to explore further the potential for new services to emerge in the market. We are interested in both alternative advice services and unregulated information services. We want to understand more about the barriers to providing alternative services. For instance, is there a lack of demand for new services or are there economic or regulatory barriers that prevent them from emerging?" it said.

The FCA has also asked firms for their feedback about the effect that open finance could have on the financial advice market. It intends to host a number of discussion events on the topic in the early part of this year.

Insurance and wealth management expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law, said: "It is a few years since FAMR first started, but the questions over barriers to providing advice and guidance to mass-market customers and whether customers will use the services provided remain".

"Although the use of technology and range of models have moved on significantly, changes in regulation – and guidance applying it – have not been sufficient to free up the financial guidance landscape as yet in the way that the industry might have hoped. Firms should take the opportunity to explain any challenges they face in creating viable models while the FCA is in listening mode," he said.

The RDR was a regulatory initiative by the FCA's predecessor, the Financial Services Authority, aimed at establishing a more resilient, effective and attractive retail investment market. A number of new retail investment rules took effect in 2012. FAMR began in 2015 and aimed to identify ways in which the government, industry and regulators could take collective steps to stimulate the development of a market which delivers affordable and accessible financial advice and guidance to everyone, at all stages of their lives.

The FCA published its first post-implementation review of the RDR in 2014. In 2017, it announced that it would delay its second post-implementation review so that it could address the impact of the RDR and FAMR together.

The review is part of the FCA's wider work on retail investments, pensions and long-term savings.