The Financial Conduct Authority has launched a consultation on proposals to make it easier for firms to offer more simplified forms of financial advice to consumers.
In a consultation paper published on Wednesday, the regulator said simplified advice can help consumers with more straightforward needs and do not require a full assessment of their financial circumstances, making it more accessible and affordable.
Firms are already able to offer more simplified forms of advice but not many offer it. To encourage a wider take-up, the FCA is proposing to make small changes to some of the rules.
These include simplifying and consolidating the suitability framework into one set of common rules and expectations, as well as clarifying existing flexibilities in suitability rules with an expectation that advisers consider ‘sufficient’ information.
It also sets out plans to rebalance the role and purpose of suitability communications to support firms making them concise, consumer-focused and proportionate.
In addition, the FCA is proposing to give firms greater flexibility in how they design and deliver ongoing advice services, including moving from a fixed annual suitability review to periodic reviews based on clients’ needs.
The regulator is also starting a discussion about the future of trail commission to modernise the rules and to prevent potential consumer harm.
It stressed that qualification standards for advisers will remain the same and there are no plans to change the adviser charging rules.
Sarah Pritchard, deputy chief executive of the FCA, said: “For too long the support people need to make important financial decisions has been out of reach for many. A market that provides good quality, lower cost simplified advice alongside comprehensive financial advice and targeted support will better support people making decisions about their financial lives.
“We want to see more people getting supported who aren’t currently, and a market that innovates and offers tailored services to meet differing consumer needs.
“We welcome everyone’s views on whether our proposals will achieve our aim of building firms’ confidence to offer a wider range of advice and ultimately, to help consumers navigate their financial lives.”
The FCA’s plans were welcomed by the advice industry, who said they mark an important step towards closing the advice gap in the UK.
James Heal, director of public policy at St. James’s Place, said: “The FCA’s consultation is a welcome step in clarifying the requirements around ongoing advice services, especially the recognition that consumers need different things from ongoing advice enabling some flexibility in offering.
“We are also pleased that the FCA recognises the need for firms to be able to design commercially viable simplified advice. On this latter point, we believe a lot of work will be needed if the objective is to genuinely widen access to advice, close the advice gap and encourage more people to invest for the long term.”
Rob Hillock, head of personal financial planning at Broadstone, commented: “Too many people are making complex decisions about pensions, investing and retirement without any support so creating a clearer framework for targeted support and simplified advice could significantly improve access to help.
“The key will be ensuring consumers clearly understand the difference between guidance, targeted support and full financial advice, and that firms have the confidence to engage with customers without excessive regulatory risk. If implemented well, these reforms could make financial support more accessible and affordable, particularly for people approaching retirement who face some of the most complex financial decisions of their lives.
“This could fundamentally change how people access financial help in the UK, moving the system away from advice being only for the wealthy towards more scalable support for the mass market.”
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