Financial Advice Market Review – Bridging The "Advice Gap"?
HM Treasury have embarked on what they call a "major new review to radically improve access to financial advice".
Last week HM Treasury launched a review that seeks to consider how financial advice could work better for consumers.
HM Treasury's press release explains that the review to be led by HM Treasury and the FCA will examine all types of retail financial products to include pensions, savings, mortgage and insurance.
One of the purposes of the review will be to consider "the advice gap" between those more wealthy consumers compared to those of lesser means. The impetus for this part of the review is described as building on the Government's pension reforms which have allowed people "real choice and freedom over their savings and given them access to free and impartial guidance".
The Government's aim of improving the standard of financial advice to all types of consumers is to be applauded. However some commentators have concerns that the burden of regulatory requirements means that consumers in some cases will simply not be prepared to pay for the time advisors need to commit to providing financial advice. This may result in a minority of unscrupulous advisors targeting those consumers of lesser means leaving them with unsuitable financial products.
This conundrum neatly fits in with the Government's second aim of their review of ensuring that the regulatory and legislative environment encourages firms to innovate and grow their business models to provide affordable and accessible financial advice. It will be of interest to see how the Government seeks to support advisor firms to provide affordable advice to consumers. It is anticipated that the expert advisory panel made up of industry leaders will provide a voice for businesses on the difficulties smaller-sized firms face in providing competitively priced advice services which still covers advisers' time and the cost of regulation.
The review panel have been tasked with providing the following:
- a package of reforms to:
- empower and equip all UK consumers to make effective decisions about their finances
- facilitate the establishment of a broad based market for the provision of financial advice to all consumers
- create an a regulatory environment which give firms the clarity they need to compete and innovate to fill the advice gap
- a set of principles to govern the operation of financial advice
- measures to ensure standards of behaviour for firms within all types of financial advice markets are in accordance with those principles
- proposals as to whether the regulatory perimeter for financial advice should be amended, taking into account European legislation
- an examination of the role that might be played by regulatory carve-outs such as a so called safe-harbour
- a consideration of the proportionality of rules and their impact on affordability and availability of financial advice and products
- indications of
- the resources needed for implementation of these proposals
- a framework for evaluating how successful reforms have been in closing the advice gap, post implementation
Initial work and evidence gathering will be undertaken over the summer with a view to producing a consultation document in autumn 2015, in advance of next year's Budget. No doubt readers will wait with bated breath to see whether the Government will be able to provide tangible proposals that are even-handedly able to bridge the "advice gap".