The group says that advisers are facing a regulatory overload. Last year, the FCA issued roughly two outputs per week. While not all these were relevant to advisers, many in the industry discussed the weight of regulation as well as the overwhelming need to ‘cover their backs’ for fear of repercussions further down the line. On top of the concerns generated by the regulation, the costs in terms of time as well as money are huge barriers to both retaining advisers and attracting new entrants to the market.
In order to reduce these pressures, SimplyBiz Group suggests that the FCA focuses on dramatically reducing and simplifying the regulation it produces. On top of this, consumers must take greater responsibility for the decisions they make in terms of understanding the advice they have received. Introducing a 15 year long-stop would also restore confidence in the sector and improve adviser sentiment.
Additionally, the current FSCS funding model, with the adviser bearing the costs for this compensation fund, is grossly unfair and unsustainable. SimplyBiz Group proposes that product providers should become the primary source of funding of the FSCS, adding that providers have significantly greater market intelligence than anyone other than the regulator and so should be well able to identify ‘problem firms’ at an early stage. Either providers could bear the full costs, or, advice firms could make a token contribution – with advisers paying 20% of the cost of the FSCS and providers contributing the balance.
In order to encourage less well-off consumers to seek advice, SimplyBiz there also needs to be greater transparency of product costs. This could be introduced using the Total Expense Ratio of a product. TER is a remarkably helpful and comprehensive guide to the cost of a product and, while cost is not the only factor by which to judge a product, adopting TER as the industry standard would be an important starting point for consumers to help them understand differing products.
Finally, SimplyBiz feels that consumers' right to decide how they pay for advice was removed by the RDR, to the "serious detriment of the consumer". The Group proposes that advisers and product providers have the ability to offer consumers the choice of having the adviser’s fee paid via, and over the life of the product, rather than by a direct fee.
Ken Davy, Chairman of the SimplyBiz Group, said:
“We warmly welcome the FAMR and believe it is a timely and critical step towards revitalising the advice market. The advice gap is widening on a seemingly daily basis. The number of financial advisers has dropped by 90% in the last 27 years and with the RDR removing commission, advisers have been forced to concentrate on their wealthier clients.
“In order to help those less well-off access advice and rejuvenate this industry, the FCA and FSCS need to examine several of their measures and review their protocols. Our proposals will make a significant contribution to improving regulatory clarity and will therefore help create the right environment for innovation and growth.”
