On 3 December 2020, the FCA published its evaluation of its work on the financial advice market.
In May 2019, the FCA published a Call for Input, outlining the intended scope of the review of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR). To supplement the Call for Input, the FCA held a series of stakeholder events across the UK to gather further feedback. Through 2019 and 2020, the FCA conducted new research to establish an up-to-date evidence base. This included qualitative and quantitative research with consumers, data collection from a representative sample of firms operating in the market, and looking at some international markets, to see what lessons can be learned.
The evaluation found evidence of some improvements in the market since the conclusion of FAMR:
- Approximately 8% (4.1m) of all UK adults have received financial advice, an increase from 6% (3.1m) in 2017.
- Adviser numbers are up from 35,000 in 2012 to 36,400 in 2019 (4% increase).
- 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).
- Estimated assets under automated advice services increased from £0.4bn in 2016 to £3.2bn in 2019.
- Consumer awareness of automated advice has increased, with 19% of consumers reporting having heard of these services (compared to 10% in 2017).
The evaluation also found that while more consumers are getting the support they need, further innovation could help even more consumers make better use of their finances.
- Many consumers are still holding money in cash that could be invested to provide potentially higher returns, but they have not sought or received the help with their finances that would help them to make better investment decisions.
- The industry offers a range of services but there is significant clustering around certain service types and price points. More innovation in services can help drive greater competition between firms across the market.
- More tailored guidance services and simpler advice services could help to attract more consumers towards the help they need. However, during our review, some firms raised concerns about understanding the point at which more general forms of consumer support become advice, suggesting this limits their ability to innovate.