"We are taking steps now to give firms greater confidence to support consumers, pending broader reform, by clarifying the boundary of the current regime."
The FCA has revealed more information for its joint review of the Advice Guidance Boundary with the Treasury.
While the review is ongoing, the regulator has published clarification for firms who want to support consumers more, particularly during the increased cost of living, without providing a personal recommendation. This reflects what firms can currently do under the existing framework and does not represent any regulatory change or pre-empt any results from the review. The intention of the information is to help firms get closer to the current boundary so that consumers can benefit from support now, pending broader regulatory reform.
As part of this, the FCA has set out examples of where a conversation with a consumer would not be classed as a personal recommendation. The examples include where a consumer asks about the difference between an ISA and pension, where a firm points a consumer to tools which can help them budget, or where a consumer who wants to take out an annuity has a partner.
The FCA has also set out examples of good practice where it would expect firms to help consumers and comply with the Consumer Duty. This includes signalling the drawbacks of having too much cash that is not invested or outlining the risks of transferring a pension if valuable benefits may be lost.
Key themes for the review
The FCA says key themes and insights have emerged from the early phase of its work, informed by engagement with industry and consumer groups, and which will guide the next phase of the review.
The FCA says the "solution to this challenge will not be met by changes to regulated advice alone". People’s needs are diverse and vary over their lifetime and the FCA says it needs firms to "actively engage and provide flexible forms of support that can adapt to different types of financial decisions".
It added that to provide more support to more people it will be necessary for firms and consumers to manage risk, rather than eliminate it. This is because risk is a key driver of cost to firms and ultimately to consumers which directly impacts on the availability of support.
Incorporating the Core Investment Advice regime into the Advice Guidance Boundary Review
In November 2022 the FCA set out initial proposals for a Core Investment Advice regime, seeking to broaden access to 'narrower-scope', or simplified, financial advice. Since then, the wider Advice Guidance Boundary review has been announced which the FCA says has "the potential for more substantial change".
In addition, the regulator admitted it has received "limited support from industry" for the initial set of proposals and, as a result, has decided to roll the development of these proposals into the broader review.
The feedback from the initial consultation was that firms wanted the proposals to go further in terms of examining the boundary between advice and guidance – in rolling this work into the boundary review the FCA says it will be able to consider and develop proposals for more significant reform.
The FCA will provide a further update in a policy paper that will be published in the autumn.
Sarah Pritchard, executive director of markets at the FCA, said: "It is vital that people get the help they need to make effective decisions – whether that be guidance or full financial advice from a qualified financial adviser. This is particularly so now, with the cost-of-living pressures. We want consumers to have greater confidence to invest, but to achieve that people need access to the right information to help them make decisions, understanding levels of risk. Our joint work with the Treasury in the months ahead will help to achieve that. In the meantime, and to see quicker improvements, we are taking steps now to give firms greater confidence to support consumers, pending broader reform, by clarifying the boundary of the current regime."
Chris Hill, CEO of Hargreaves Lansdown and FCA Practitioner Panel member, added: "Data and digital tools mean there is now a lot more we can do to nudge consumers to better investing behaviours. The clarity the FCA are bringing today on the advice boundary, and the commitment to review this, show that we can develop a new regime to ensure firms can do more to drive better consumer outcomes."
