Press comment: FCA review of advice
key to tackling industry challenges
1 May 2019
If you’re covering the Financial Conduct Authorities call for input on the Retail Distribution Review and the Financial Advice Market Review, please see the following comment from Andy Thompson, CEO of Quilter’s advice businesses.
“The Retail Distribution Review and the Financial Advice Market Review were wide ranging and time has moved on since then so it’s important that the regulator focus its energy on the most pertinent part of those reviews. In general this is an excellent opportunity to tackle some of the challenges within in the advice industry that mean it isn’t working to the best of its ability to help the public make the most of their money.
“Since its implementation in 2013, the RDR has transformed the financial advice industry in the UK and has achieved its goal of increasing transparency, fairness and professionalism of the sector. For example, the advice supply has suffered as it made the economics of financial advice more challenging, resulting in fewer advisers per adult in the UK than before. Figures from APFA (now PIMFA) show the number of advisers fell 18% from 27,080 in 2009 to 22,168 in 2013 following the implementation of the regulation. While the number of advisers has increased somewhat since 2013, there is still a substantial lack of supply.
“This is at a time when the demand and need for advice has surged thanks to a combination of political, economic and social factors, including an aging population, pension freedoms and intergenerational inequality. 750,000 people retire each year, and they are just one category of potentially financially vulnerable people. Indeed, our analysis shows that 42 million people need financial guidance.
“This has not gone unnoticed and is in part what led to FAMR which was launched in August 2015. FAMR was tasked with finding avenues to provide affordable and accessible advice and guidance to everyone. However, to date FAMR has not achieved its goals and has not enabled the industry to offer meaningful financial guidance in support of a public service.
Value for Money
“The FCA’s question reveal its areas of interest, which include a number of questions on value for money. As currently phrased those questions are slated as what do consumers value from advice and why? It’s important to recognize that one of the major challenges the advice industry face is how it articulates its value and helps consumers understand what they gain and how.
“With the advent of MiFiD II, advisers are already facing a challenge of how it explains its fees to clients. Historically, the focus has been on investment returns, but that does not capture what advisers are actually doing. The basics of what advice offers also includes taxation and helping clients navigate their own biases and uncertainty around finances. This combined with investment choices provide a measurable, quantifiable difference. As an industry we need to do a better job of flagging that value.
“Trusted, insightful financial advice is the best way for people to achieve financial security and prosperity. Greater political emphasis needs to be placed on the importance of expert financial help, whether that is guidance, debt support, help budgeting or professional financial planning.
“As it embarks on it review the FCA needs to consider carefully what the misunderstandings are around advice and how it can help boost its positive profile.”
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