Financial Conduct Authority to hold roundtable discussion with IFAs to test simplified advice

On 15 November 2024, the Financial Conduct Authority ("FCA") published a feedback statement setting out the responses received on the Advice Guidance Boundary Review and what approach they will take on the proposed targeted advice and simplified advice regimes going forwards.

Background

The FCA is wanting more people to be able to make more informed decisions about their finances, with only 8% of adults reported to have taken financial advice over the previous year. The FCA is concerned that this advice gap is reducing people's confidence to invest and save. On 8 December 2023, the FCA and the Government jointly published a Policy Paper on the Advice Guidance Boundary Review that set out their initial proposals on how to close this advice gap. The Policy Paper contained three proposals:

• Targeted Support – a new form of support allowing authorised firms to provide suggestions that are appropriate to consumers with the same high-level characteristics.
• Simplified Advice - a new form of advice that makes it easier for firms to provide affordable personal recommendations to consumers with more straightforward needs and smaller sums to invest.
• Further clarifying the boundary - providing greater certainty for authorised firms on scenarios where they can provide support that does not constitute regulated advice.

The FCA sought feedback from stakeholders on these proposals.

Feedback

The FCA summarised the feedback that it has received for each of the three proposals:

• Targeted support was the option most respondents believed would help customers at scale, so long as consumers have confidence in it and understand what protections it provides. 
• Many saw a role for simplified advice but recognised that it may not meet the demands of the mass market. There were some suggestions that simplified advice would be needed in conjunction with targeted support.
• Interest was shown for the FCA to further clarify the boundary between regulated financial advice and unregulated guidance, however it was recognised that it was unlikely to resolve the support gap and its own.

FCA Approach

Due to the significant increase in defined contribution pensions being accessed in 2023/24, the FCA's first consultation in December 2024 is to focus solely on pensions support. Further proposals for targeted support for retail investments will be released in the first half of 2025, with the FCA is currently conducting consumer research.

The FCA will continue to work with the Information Commissioner's Office and The Pensions Regulator on the Privacy and Electronic Communications Regulations (PECR) 2003 including how these interact with proposals being considered as part of this review, including targeted support. To this end, on 15 November 2024 the FCA issued a joint statement with the ICO and The Pensions Regulator giving firms greater clarity about communications they can make under the Consumer Duty that are compatible with PECR.

The FCA is continuing to engage with firms, industry working groups and trade bodies to understand how they can better support their customers and to collaborate to test options. Over 85% of investment adviser firms employ 1 to 5 advisers and in 2025 the FCA will engage with them directly through a series of roundtables across the country. They will use this, and other engagement, to determine the willingness and capacity of these firms to offer a simplified advice service. The feedback to these consultations will be used to finalise the FCA's proposals.

Comment

There had previously been reports that the FCA would focus solely on targeted advice. However, the FCA still appears to be exploring whether a low-cost simplified advice service should also be introduced. The FCA explained that they will 'keep an open mind to test whether targeted support and simplified advice will achieve the aims of this work.' 

Some IFAs have previously expressed concerns that a low-cost simplified advice service may result in high costs and time investment in lower-asset clients. The FCA has invited firms to use the regulator’s own prototype of a simplified advice or targeted support service where such concerns can be tested. The regulator has stated that the purpose of this is to 'collaborate with [firms] to test options.' Firms that wish to take part can contact the FCA at AGBR.external.engagement@fca.org.uk.

To read the FCA's feedback statement, please click here.