The FCA’s Advice Guidance Boundary Review is currently missing how technology can help better deliver guidance and advice through provider access to rich data, which risks creating greater uncertainty, says Chet Velani, managing director at EV.
The Advice Guidance Boundary Review by HM Treasury and the FCA is bold and in the words of Sir Humphrey Appleby, it would seem to be a ‘very courageous decision’ to seek to reduce uncertainty and confusion by introducing two new levels of service when consumers are already struggling to understand the difference between the existing two: guidance and advice.
On a serious level, the Review does not seem to have taken account of how technology is changing the landscape of financial services. For example, the Review states that targeted support ‘would be based on limited customer data and the consumer may have individual needs that have not been identified’. This makes sense if a product manufacturer has only limited customer data that can be used to identify ‘people like you’. However, increasingly, there is access to much richer data through the growth of open banking and product aggregation services.
Will financial service firms be allowed to ignore the rich data they hold for some of their customers in order to facilitate allocating these customers into broad groups with similar characteristics? Is it ok to suggest to customers who appear to be heading for poor retirement outcomes, that they increase their pension contributions when there is data available showing that some of them have high levels of credit card debt? Ignoring this information does not seem to sit well with Consumer Duty.
Simplified advice is defined as ‘a one-off service whereby the firm would take into account only relevant information about a specific consumer need’. With a proposed investment limit of £85,000, it seems to be aimed at the same group of consumers as targeted support. It seems highly likely that they will struggle to distinguish between the two services on any basis other than charges. In turn, distinguishing simplified advice from holistic advice, when the latter is stated to be focused on one need area may be an additional struggle for consumers.
This is not to say that any of this is insurmountable but working through all this complexity is going to take a lot of time, not allowing, of course, for a potential change of Government, so we shouldn’t hold our breath. One can’t help wondering if it would be very important to also spend the time and effort trying to get ahead of the curve and understand how technology such as AI, which is moving at pace, is going to transform the effectiveness of guidance and improve the efficiency of delivering advice.
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