The Financial Conduct Authority has outlined new proposals to improve people’s access to financial advice and help them invest with confidence.
It set out the proposals in its new consultation paper on the consumer investment strategy published today (30 November).
The proposals seek to create a separate, simplified financial advice regime to make it cheaper and easier for firms to advise consumers about certain mainstream investments within stocks and shares ISAs.
It said the proposed changes aim to prevent in-person financial advice from being too costly for many potential investors as this can stop them from investing when it may be in their interest to do so.
The regulator noted that its recent Financial Lives survey found 4.2 million people in the UK held more than £10,000 in cash and are open to investing some of it.
It said while keeping a cash buffer is a sensible way of dealing with unexpected expenses, consumers who hold significant amounts of excess cash “may be damaging their financial position” as inflation reduces the value of their savings.
FCA executive director of markets Sarah Pritchard said: “Now more than ever, people across the UK should have access to useful and affordable financial products and services which can improve their quality of life and support the economy.
“These proposals are part of our work to deliver a consumer investment market where people can readily access support and firms aren’t deterred from providing it.”
The regulator said it is consulting on streamlining the customer ‘fact find’ so advice is more straightforward for both firms and customers.
And also limiting the range of investments within the new regime so the advice is easier to deliver and understand.
Other proposals include making the qualification requirements for the new regime more proportionate so delivering the simplified advice is less costly for firms.
And allowing advice fees to be paid in instalments so customers aren’t burdened by large upfront bills.
The consultation on broadening access to financial advice for mainstream investments runs until 28 February 2023.
IFAs and other stakeholders in the financial services sector have given mixed reaction to the FCA consultation.
Hargreaves Lansdown chief executive Chris Hill said: “We support the FCA’s move to make investing simpler and it’s great that the FCA recognises that today’s all or nothing approach to advice doesn’t suit everyone, especially those with sufficient savings who are started out on their investment journey. The proposal should help narrow down options for those who want to invest but aren’t sure where to start.”
West Riding Personal Financial Solutions managing director Neil Liversidge told Money Marketing that the FCA should address some of the key obstacles to affordable advice.
Liversidge said: “Advisers will support anything that facilitates more efficient and affordable delivery, but the FCA needs to realise that the FOS and the claims culture is the main obstacle. So long as the FOS keeps bending over backwards to find ways to pay out chancers who don’t deserve it, the problem will remain. The FOS needs to be impartial. It’s supposed to be, but it isn’t.”
Meanwhile, a recent survey has found that the UK’s financial advice gap has worsened over the last five years.
The survey conducted by adviser tech firm Intelliflo found that 73% of financial advisers believe the gap between those who get advice and those who want it but cannot afford it has widened over the last five years.
More than six in 10 (62%) financial advisers believe the advice gap grew even more during the pandemic.
The survey also found that more than half (58%) of the advisers in the poll have seen an increase in people seeking advice in the last 12 months.
Interactive Investor CEO Richard Wilson called the FCA proposal a “watershed moment”.
He said: “This is a watershed moment in the UK. It will determine whether we can begin to change the narrative around long-term financial wellbeing. Get it right and the financial services industry can find simple solutions that break down barriers to advice and crucially, reduce the advice gap. What we need is simple solutions, with clear pathways that don’t make people feel anxious – solutions that are easy enough that people will actually do it.
“Financial advice currently centres around complex suitability homework which gets in the way of finding simple, affordable solutions. This is joined up, right way round thinking from the regulator. It’s a big deal.”
