The Financial Conduct Authority’s director of consumer investments has acknowledged that the simplified advice regime is likely to be of more interest to larger financial services firms, but she encourages smaller advice firms to consider it.
Speaking at an FTAdviser event to mark a decade of RDR this morning (January 24), Therese Chambers said it would “certainly” be easier for firms which operate at a bigger scale to enter the simplified advice market because it would require investment.
But she said: “Does that mean that it is only open to large firms or platforms or banks? Certainly not. All firms need to be considering the future sustainability of their business, including where their next generation of clients will come from and where their next generation of staff will come from.”
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In November the FCA published a consultation into simplified advice to make it cheaper and easier for firms to advise consumers about certain mainstream investments within stocks and shares Isas.
As part of the regime, the FCA said it will create a new handbook definition of core investment advice.
Chambers said the increase in trading during the pandemic showed there was a large number of young people who were interested in investing but for whom the “traditional routes” to doing so were “not working”.
It was this, she said, which the FCA was attempting to address through the creation of simplified advice and by creating a “lighter regulatory burden” which would encourage firms to move into the advice sector.
Chambers said: “What we are trying to do with our proposals on core advice is to create a landscape which firms want to move into.
“A stocks and shares Isa as an obvious first step. If they can use their Isa allowance, and then they have the confidence to do it again and then to do it again, then by year three or four [the consumer] will be ready for the full range of financial advice.”
Late last year the FCA said it was also reviewing the advice-guidance boundary, a move which Chambers said was a result of HM Treasury’s wider review of EU regulation.
She said: “Something that is absolutely clear to me is we will want significant industry input in helping us getting somewhere that’s fit for the future.
“Mifid II was written in a pre-digital world. That in itself should tell you it is ripe for an overhaul.
“But we have no secret plan for what it going to replace [the advice-guidance boundary]. We have an open mind as to what that future framework should look like and we want it to be shaped by what industry tells us and by what consumers tell us.
“To the extent to we do have secret plan, it is that we want to make sure we have got the balance right between the weight of regulation and the risks to the consumer.”