"The fixed cost of advice – which is inevitable – looks unfavourable relative to the smaller amount of investment involved."
In a City Banquet speech at Mansion House yesterday, Bailey said low rates "mean that the cost of advice looks less favourable when compared to returns".
He added that this "probably has more of an effect in areas where the fixed cost of advice – which is inevitable – looks unfavourable relative to the smaller amount of investment involved".
In response, Bailey said the FCA is "providing all the support it can" to innovation in the supply of advice through Project Innovate and the Sandbox, as well as through reviews of financial advice such as FAMR.
Bailey also raised concerns that the savings rate for retirement "is for many people too low to meet their expectations of retirement", noting that DC accumulation rates are typically lower than DB rates of the past, compounded by low real interest rates.
He added: "In the provision of financial services, flexibility and choice can on occasion be the companion of complexity. To give an example, the transfer of a pension saving from a DB to DC scheme is one of the most complex transactions an individual can undertake, with a genuinely high degree of uncertainty around some of the key variables that drive outcomes. In our supervision work, we see good practice, and we see bad practice."
Bailey said that the FCA has recently turned its attention towards retirement income products, drawdown and non-workplace pensions.
He said the regulator would publish its pension strategy later this year, "setting out for the first time our assessment of the major regulatory issues in the sector".
