Explore the FCA's recent speech on simplified advice, the advice/guidance boundary review, and the Consumer Duty. Learn about the scope, timeline, and potential impact on firms and consumers in the financial services industry. Stay informed on regulatory developments and opportunities for innovation.
On March 21, 2023, Therese Chambers, the FCA's Director of Consumer Investments, spoke at the TISA Financial Advice and Guidance Conference in London. In her speech, she discussed the Retail Distribution Review, the simplified advice regime, and the advice/guidance boundary review.
Chambers acknowledged that while the Retail Distribution Review has had positive impacts, there are areas where the sector could perform better. The FCA aims to reduce the regulatory burden on firms to enable them to better serve consumers, especially the most vulnerable.
Key topics in her speech included:
The FCA wants to foster a consumer investment market where customers can invest confidently, understanding the risks and regulatory protections. Recognizing the demand for affordable and simplified advice, the FCA published Consultation Paper 22/24 (CP22/24) in November 2022. This paper aimed to broaden access to financial advice for mainstream investments, particularly through stocks and shares ISA wrappers.
Responses to the consultation showed that firms are eager to do more and support a core investment advice regime. However, the FCA acknowledges the need for regulatory clarity and is considering how to develop a simplified advice regime and establish a timeline for its implementation.
In 2022, the FCA and HM Treasury announced a joint holistic review of the boundary between advice and guidance. The goal of this review is to better understand how the boundary is functioning and its impact on consumers, which will inform any necessary changes.
The review's focus is on the consumers who use these products and services, making the "consumer voice" a priority. Chambers confirmed that accumulation products (including general investment accounts, ISAs, and pension wrappers) and decumulating assets, such as pensions decumulation, are within the scope of the review. However, Defined Benefit transfer advice and pensions with safeguarded benefits will be excluded.
As a substantial piece of work, the review will take time. The FCA, together with HM Treasury, is considering how to engage with the industry as part of the review and create opportunities for more formal input on potential options.
The FCA is currently evaluating responses to its Discussion Paper (DP22/6) on the Future Disclosure Framework and plans to provide feedback soon. Positive responses have been received for a principles-based approach and flexibility for firms to effectively communicate disclosure to consumers.
Chambers noted good progress by firms in implementing the Consumer Duty but emphasized the importance of providing information to help customers understand their options and the risks and consequences of their decisions.
Lastly, Chambers highlighted the role of the Regulatory Sandbox in allowing firms to test innovative propositions on personalized guidance, and the Digital Sandbox as a platform for firms to access data sets to test and build prototype solutions. She encouraged interested firms to discuss these opportunities with the FCA.
Kayne Osbourne is ComplyEasy's Founder. Kayne is a Chartered Fellow of the Chartered Institute for Securities Investments, CAMS certified and has advised dozens of fintech and traditional financial services businesses with turning compliance into an engine of growth.
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