The Financial Conduct Authority’s advice guidance boundary review is ‘a step in the right direction’ but more clarity is needed from the regulator on certain aspects.
Last year the FCA set out three proposals for reforming the advice boundary, including clarifying the advice/guidance boundary, a simplified advice option and a targeted support regime.
The feedback period for the review is set to close today (February 28) with firms across the sector submitting their responses to the regulator on its proposals.
Toby Band, managing director at First Sentinel Wealth said he liked what the FCA were doing with the review but believed it missed the mark with its targeted support proposal.
He said this was because it leaves the customer to make their own investment decisions without the security of it being regulated advice.
He added: “It will be challenging to implement this guidance, we will undoubtedly be asked by customers to comment on whether it is a good decision or not, which we will have to sit on the fence about to avoid risking the guidance turning into advice.”
The Society of Pension Professionals (SPP) believed the targeted support regime could create an opportunity for many firms to be able to better support consumers.
However, Jasmine Smiley, chair of the SPP financial services regulation committee, felt it would only be successful if “the new regime is properly considered and very carefully implemented.”
Anne Fairweather, head of government affairs and public policy at Hargreaves Lansdown, thought the proposals for targeted support would be “transformative” to the way people engage with financial services.
She added: “We know that there is more we could do to drive good outcomes for clients if we were able to personalise the guidance they receive.
“Whether it’s helping a client to understand retirement options or which investment path to take, allowing for greater relevancy and personalisation will help us manage our finances more efficiently.”
Fairweather suggested the targeted support regime could take the shape of improvements in communications while in other areas it may be embedded into journey design to improve decision making.
She also added it could result in the development of financial coaching services.
“The key for the new regime is to leave space for innovation. The approach should focus on creating a regulatory framework in which firms can confidently iterate ideas to drive innovative solutions to client problems, whilst measuring outcomes.
“Consumer understanding will be extremely important but we are urging the FCA to steer away from prescriptive disclosures as the use cases for targeted support are likely to be varied.”
Simplified advice
Band thought the simplified advice option was a better proposal than the targeted support regime, but felt the limit would need to be increased to make it commercially viable for most advice firms.
Back in December, the FCA said the complicated nature of decumulation decisions around drawdown and annuities, meant it would be excluded from the simplified advice regime.
