FCA publishes evaluation of work on financial advice market

The FCA has published an evaluation of the impact of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).

The regulator said its evaluation had found “some improvements” in the market since the conclusion of the FAMR, revealing that approximately 4.1 million (8%) of all UK adults have received financial advice, an increase from 3.1 million (6%) in 2017.

Adviser numbers are also up from 35,000 in 2012 to 36,400 in 2019, which the FCA revealed was a 4% increase.

The findings indicated the creation of the FCA’s Advice Unit has helped firms to develop new automated advice models – it has received 137 applications for support, with 65 accepted – while estimated assets under automated advice services increased from £0.4bn in 2016 to £3.2bn in 2019. Consumer awareness of automated advice has also increased according to the FCA, with 19% of consumers reporting having heard of these services, compared to 10% in 2017.

Both the RDR and FAMR sought to improve the distribution of retail financial services products, and the FCA had committed to evaluate their impact, to test whether they delivered their desired outcomes.

FCA interim executive director of strategy and competition, Sheldon Mills, said: “We want consumers to have access to high-quality advice and guidance at the right time in their lives, to give them the confidence to make better investment decisions. Our evaluation has found the advice and guidance market is moving in the right direction, but still has further to go.

“We will use the evidence base this evaluation has given us, along with the responses to our Call for Input on consumer investments, to shape our work to improve the market.”

Commenting on the regulator’s evaluation, Openmoney co-founder, Anthony Morrow, said: “The FCA rightly calls out the lack of innovation within much of the regulated advice sector, which unfortunately comes at a time of enormous innovation in non-regulated areas of financial services such as Buy Now Pay Later schemes.

“More people than ever are being lured by these gift-wrapped debt traps to pay for an unsustainable lifestyle following the financial pressure brought on by the pandemic, an increase in online shopping habits due to lockdown, and a desire to push the boat out for Christmas.

“Clearly innovation at speed is possible within financial services and the advice industry needs to step up to the plate and find better ways to provide accessible and affordable advice to all, regardless of how much money they have.”

Hargreaves Lansdown interim head of policy, Nathan Long, added: “People require different levels of help with their finances throughout their life. Some may just need to be pointed in the direction of some helpful information, particularly when they’re starting out.

“Others may prefer to pay a fee for a personalised recommendation, especially when their circumstances become complicated. The level of help someone gets should be their choice, not determined by the ambiguity as to what the financial services industry understands to be ‘advice’ and ‘guidance’.”

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