The complexity of understanding the boundary between advice and guidance is emerging as one of the key themes of the FCA’s review of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).
The FCA says its review will address the concerns of firms that feel unable to provide potentially useful information to consumers if they feel there is a risk that it will be perceived as regulated advice.
The regulator will also address concerns that regulatory costs have contributed to a worsening of access to financial planning services.
In an update on its call for input on the evaluation of the RDR and FAMR, the FCA says it has received feedback that stakeholders think that consumer education in financial planning issues could be improved to encourage engagement with advice and guidance services.
The regulator has decided not to bring issues relating to defined benefit transfers into the scope of this initiative as it says it is covering this issue in its work elsewhere.
Aegon pension director Steven Cameron says: “Aegon had called on the FCA to focus on the potential for the ‘advice gap’ for defined benefit scheme members to be a key part of the review of RDR and FAMR. While the FCA has decided against this, we are pleased it has noted concerns raised through its call for input and we welcome the assurances given that these concerns will be fed into other projects. In its work on defined benefits, the FCA has rightly focussed on ensuring individuals who receive advice receive suitable advice. But attention also needs to be given to whether individuals may struggle to access advice in this key area, and if the supply of advice will reduce further as a result of regulatory interventions or increases in Financial Ombudsman Service compensation limits. We would welcome the FCA ensuring its drive to improve the quality of such advice does not inadvertently lead to a shrinkage in supply, which could be to the detriment of defined benefit members.
“We welcome the focus the FCA will give within its RDR and FAMR evaluation to the boundary between guidance and advice. Most people would benefit from financial advice at certain points in their lives. But it’s also important to supplement this with guidance services for example through the workplace or for those with smaller amounts to invest.”
