Advice-guidance boundary review
The FCA has committed to publishing an advice-guidance boundary review policy paper in the autumn.
The aim will be to set clear expectations for the support that firms provide their customers and ensure consumer protection remains at the core of any future regime.
Importantly, it aims to allow firms to actively engage and provide flexible forms of support to consumers.
Given the potential for more significant change through the advice-guidance boundary review, the FCA has also decided to roll its "core investment advice" proposals into this review.
The aim of the core investment advice regime was to allow firms to provide mass-market consumers with straightforward financial needs greater access to simplified advice on investing in mainstream products, specifically within stocks and shares Isas.
There was very limited support from the industry for the initial set of proposals consulted on. This is significant as the FCA has taken note of the feedback and will revisit the challenge.
Historically, FCA-authorised firms, understandably, have been hesitant to provide help to consumers due to an overly cautious interpretation of the current regulatory framework, being concerned about the regulatory requirements that apply if they provide a personal recommendation.
The aim of the advice-guidance boundary review will be to create a clearer distinction between advice and guidance.
The FCA, however, in the interim, has issued a reminder that not all support to a consumer constitutes a personal recommendation, for example where the communication is purely information without expressing any opinion or value judgement on the relevance of that information to the customer’s investment decision.
This extends to general advice not amounting to the regulated activity of advising on investments. For example, where a customer asks a firm about the difference between an Isa and a pension, a firm can explain their different features.
The recently published Financial Lives survey is relevant, as it emphasised that the majority are still not receiving formal advice.
While not everyone will always make investment decisions from a well-informed position, there is no doubt that a growing cohort of people can and should benefit from sound professional advice.
The aim of the advice-guidance boundary is to empower consumers to invest with confidence, understanding the risks they are taking and the regulatory protections provided.
With the new boundary, the FCA does not want to restrict consumers if they want to invest, but it does want them to be able to access and identify investments that suit their circumstances and attitude to risk.
