As part of the Edinburgh Reforms, announced in December 2022, the FCA and the Government are undertaking a joint review to examine the regulatory boundary between financial advice and financial guidance - known as the Advice Guidance Boundary Review. Their goal is to create a regulatory framework that ensures consumers get the help they want, at a time they need, and at a cost that is affordable. As part of the review, they have published a policy paper containing proposals for closing the advice gap.
The Association of British Insurers (ABI) has summarised its views in response to the proposals.
George Ritchie, Senior Policy Adviser for Long Term Savings at the ABI said:
“Navigating the financial world can be confusing and many consumers aren’t receiving enough support which can negatively impact their financial resilience and living standards, especially in retirement.
“The government and FCA’s proposals of targeted support and simplified advice to close the advice gap are extremely welcome. Targeted support would allow firms to use limited information about a customer to make suggestions appropriate for ‘people like them’. A simplified advice regime would enable firms to deliver advice using only information relevant to a specific consumer need. If they include certain key features, these proposals would enable firms to provide tailored, affordable support to help consumers through various stages of their saving, investment, and retirement journeys.
“For example, simplified advice needs to cover decumulation decisions given the potential for consumer harm without support and the investment limit should be raised to £225,000 as the average earner in their 30s now is predicted to retire with a DC pension pot of this size in the 2050s. Firms should be able to offer targeted support both via cross-subsidy to existing customers within existing products, and as a supported sales channel. It should allow firms to present clear courses of action to the consumer, with appropriate disclosures to ensure consumers understand the limitations of those suggestions. Regulatory clarity across both proposals is paramount to avoid any new boundary-like concerns.
“We’ve recommended that the FCA and government should press pause on ongoing work to further clarify the advice guidance boundary, and instead focus on the development of these two innovative proposals. To maintain momentum, the next stage of development should include working with industry and consumer representatives to design customer journeys, communications and disclosures to test with real people, measuring the impact on consumer understanding and financial outcomes. We will continue to support the FCA and HMT in this next stage, shifting the dial one step closer to people taking more informed decisions on their finances.”