Broadening access to financial advice & time travel (22/170)

This is the latest in the series of daily blogs on financial regulation that I began posting on my first day of Covid wfh, 16 March 2020. I hope you enjoy and find useful...

The FCA's consultation on broadening access to advice - a long-term aim of UK regulators - comes at an interesting moment.

We have 11% inflation and falling household incomes (in real terms), while, according to a recent FCA update, the proportion of "UK adults who have ￡10k or more investable assets hold the majority (75%+) or all in cash" has risen from 55-58% in a year (Table 2).

Countering high inflation is one of the FCA's main arguments for investing, but living standards are falling and more consumers are preferring to have the cash.

On a first look, the FCA's proposals all look sensible but, perhaps apart from allowing instalment payments, some version of each has been tried unsuccessfully at least once in the last 20 years. So, the detail of the proposals, and their communication, will need to be substantially different/better if they are to succeed.

Problems that have helped stymy previous initiatives include:

(i) Consumers perceiving the "simpler" regime as 2nd class, offering lower quality advice and less attractive products.

(ii) Firms deciding the new regime is too costly/unprofitable and leaving the market.

(iii) Consumers not understanding the regime and advisers struggling to explain it.

(iv) Some firms finding ways to arbitrage the new regime, blurring its boundaries and accentuating the problems above.

The consultation looks to be aware of these issues, but that's only the first step to solving them.

To put all this in context, let's take a quick jump back through time to the FSA Business Plan 2002/03, the year of the 46 priorities... These included:

(a) "consumer campaigns to increase awareness of the risks and returns associated with different products";

(b) "tools, including a DIY factfind, to help consumers identify their financial needs";

(c) "work to improve consumer understanding of risk, price and other concepts";

(d) "enhancing the minimum standards for information given by firms to consumers"; and

(e) "differentiating training and competence arrangements for advisers offering lower-risk products".

I don't think any of these would look out of place in this week's consultation but arguably, despite the best efforts of regulators at the time, not much has shifted.

Responses to the consultation, not least from consumer bodies, will be important to watch.

I?also publish a?weekly regulatory update. If you found this interesting,?sign up?to receive it direct into your inbox each week.

Don’t forget our monthly financial services regulatory update webinar is now a podcast!?Subscribe and listen to the podcast now?where David Morrey and I dissect what’s really happening in the world of regulation. I also host ongoing episodes with Irina Velkova on the latest developments with industry experts.

The UK regulatory handbook 2022 is an indispensable guide to the regulatory landscape for financial services. You can now download the handbook for 2022?here.