Oct 23, 2015 | By Spriha Srivastava
Consultation paper asks advisers for ways access to financial advice can be improved
The FCA and HM Treasury have launched a consultation paper giving advisers until 22 December to explore what can be done to improve customers’ access to financial advice.
The consultation paper, which according to the FCA is the first major milestone of the Financial Advice Market Review (FAMR), asks advisers various questions around the value of advice and the issue of the advice gap. “This could be an excellent initiative,” said Jane Hodges, CEO of Alexander House Financial Services. “There is no doubt that over the years the standards of advice and regulation have increased and I think this is testament to everyone involved.”
She further stated that things like better disclosure, more openness on Fos decisions, better qualifications, and more clarity on good and bad practices had all helped. “I don’t see this as a poor thing, I just think that the future needs something very different. I hope that they can put the past behind them and think about the future with an open mind.”
The FAMR was launched in early August to examine how financial advice could work better for consumers and to build on the government’s pension reforms. The review is being led by Charles Roxburgh, director general of financial services at HM Treasury and Tracey McDermott, acting CEO at the FCA.
In its first consultation paper, the FCA says it has seen a decline in the number of financial advisers offering professional advice - from around 26,000 in 2011 to 24,000 in 2014. The paper says a number of major providers have cut back their professional advisory business or left the market, while the remainder have been increasingly focusing on high net worth individuals.
The paper highlights the FCA’s concern over access to advice and seeks answers from advisers on how any advice gap can be closed. “Online advice would help significantly, as this allows early savers – where the risk is lower – to access savings vehicles without advice,” Ms Hodges said, adding that other measures such as more efficient processes, better risk assessment and understanding of advice risk, the use of CRMs and remote online advisers and better consumer education, could also help in bridging this gap.
The consultation paper talks about the possible ways in which the government could work with the industry and employers to enhance awareness through methods such as signposting or public-information campaigns. It also asks whether robo-advice could play a role in improving access to financial advice. Robo-advice is relatively established in the US but still catching up in the UK.
“What we do know is that this is the slowest it will ever be – the pace of change is accelerating every day and full artificial intelligence (AI) advice cannot be that far away. We need to be looking to the future and not the past,” Ms Hodges said.
The government also plans to publish another consultation paper on publicly-funded guidance in order for comprehensive analysis of the advice landscape.
Reasons people don’t take advice
- Lack of trust
- Lack of knowledge
- Access to face-to-face advice
- Access to the internet and concerns with sharing data online
- Advice not necessary
Copyright: Money Management