The Financial Conduct Authority is proposing to relax independent advice rules to make it cheaper and easier for firms to advise consumers about certain mainstream investments within stocks and shares Isas.
In a consultation paper, published today (November 30), the FCA said it would create a separate, simplified financial advice regime to improve people’s access to financial advice.
As part of the regime, the FCA said it will create a new handbook definition of core investment advice.
It proposes the overall definition comprises: advice may only be given on investments into a new stocks and shares Isa, advice may only relate to investments up to the value of the annual Isa subscription limit set by the Treasury; and advice may only be given on a sub‑set of investment products held within a S&S Isa.
The FCA said it will limit the regime to advice relating to investments held within a S&S Isa wrapper in order to keep the tax implications as simple as possible for investors.
The proposals included the relaxation of the independent and restricted adviser definition, stating that it would introduce an additional rule in COBS 6.2B where that “advice under the core investment advice regime is capable of constituting independent advice despite the firm not considering a full range of financial instruments”.
As part of the consultation process, the regulator has proposed:
- Streamlining the customer ‘fact find’, giving firms the ability to simplify and streamline their information collection exercise.
- Limiting the range of investments within the new regime so the advice is easier to deliver and understand.
- Making the qualification requirements for the new regime more proportionate to make sure simplified advice is less costly for firms. This would include allowing core investment advisers to undertake a minimum of 15 hours CPD each year, rather than the current requirement of 35 hours each year for retail investment advice.
- Introducing a new rule that will allow firms to accept payment for core investment advice in instalments, even where the advice given is transactional and there is no ongoing service or ongoing subscription to a S&S Isa
Under the FCA’s proposed rules, it applies to firms who just provide advice on investments within a S&S Isa.
“While other forms of investment Isa are available, we believe that limiting the regime to S&S Isas provides a straightforward option for investments and is likely to be an appropriate solution for consumers with uncomplicated needs and relatively low sums to invest,” it said.
Costly advice
The watchdog’s recent Financial Lives survey found 4.2mn people in the UK held more than £10,000 in cash and are open to investing some of it.
"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,” it said.
As a result, the FCA’s 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.
Sarah Pritchard, executive director of markets at the FCA, 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.”
