The review of the advice/guidance boundary announced by the Financial Conduct Authority may lead to a wholesale restructuring of the regulatory framework, the watchdog said.
In a speech at PIMFA’s Compliance Conference, Lucy Castledine, director of consumer investments at the FCA, said the review had been launched in response to a number of risks of consumer harm the FCA had identified. These included developments in social media and digital technology, which had prompted greater access to investing and increased the risk of consumer harm.
According to Castledine, the FCA has identified three further key consumer harms that it is seeking to address through its review of the advice/guidance boundary. Firstly, many consumers who might gain through investing were holding their savings in cash, the value of which over time would be degraded by inflation. Secondly, many consumers do not have the level of income they expect for their retirement and finally, consumers were “not making effective, timely and informed decisions” about their pensions.
Casteldine said: “Long-term social, economic and demographic changes have made the consumer investment market more important than ever before with consumers having more choice of products and services than they have done in the past.”
However, Castledine said that many consumers were missing out on the help they needed to make increasingly complex financial decisions.
“We think more can be done to support consumers to help them engage with their finances and make better investment decisions. This could include more tailored guided services and simpler advice services. Though we understand the current regulatory framework may pose challenges to further market development to sufficiently meet consumer needs,” she explained.
The FCA believes the advice/guidance review has the potential to lead to a whole restructuring of the regulatory framework for advice and guidance, with a view to ensuring consumers get the help they want “at the time they need it and at a cost that is affordable to them,” said Castledine.
The Treasury, in partnership with the FCA, will publish an initial policy paper before the end of the year outlining options and seeking industry feedback.
Castledine added: “We have been told to take our time. This is difficult. We need to make sure we get this in the right place. We have tried before and we’ve made advancements but this is really a fundamental opportunity for us against the backdrop of European legislation falling away to make a real difference. Engagement as part of that process will be absolutely key and I strongly believe we will land in a sensible place with this.”
