On 3 August 2023, the FCA published a statement on its joint review of the Advice Guidance Boundary with HM Treasury. The review, which was announced as part of the Edinburgh Reforms, aims to ensure that consumers get the help they want, at the time they need it and at a cost that is affordable, in order to help them make informed financial decisions.
The FCA set out the following key themes and insights which have emerged from its early phase of this work, and which will guide the next phase of the review:
- The solution to this challenge will not be met by changes to regulated advice alone. People’s needs are diverse and vary over their lifetime. The FCA need firms to actively engage and provide flexible forms of support that can adapt to different types of financial decisions.
- To provide more support to more people it will be necessary for firms and consumers to manage risk, rather than eliminate it. This is because risk is a key driver of cost to firms and ultimately to consumers which directly impacts on the availability of support.
- Any solution will rely on support being provided on a commercial basis. The review will need to focus on outcomes and design a regulatory system where commercially viable models of support can emerge.
- The review should leverage the Consumer Duty, to set clear expectations for the support that firms provide their customers and ensure that consumer protection remains at the core of any future regime, and the FCA will work closely with the Financial Ombudsman Service to do so.
In addition, the FCA has published clarification for firms that wish to provide more support for consumers, particularly during the increased cost of living, without providing a personal recommendation. This reflects what firms can currently do under the existing framework and does not represent any regulatory change or pre-empt any results from the review. The information is intended to help firms get closer to the current boundary so that consumers can benefit from support now, pending broader regulatory reform.
Finally, the FCA has announced that the ‘Core Investment Advice’ regime which it proposed in its November 2022 consultation paper, CP22/24: Broadening access to financial advice for mainstream investments, will now be incorporated into the Advice Guidance Boundary Review. This change of approach is due to the potential for more significant change that the FCA notes is now possible through the Advice Guidance Boundary Review, as well as the limited support from industry for the initial set of proposals consulted on. The consistent feedback from the consultation was that firms wanted the proposals to go further in terms of examining the boundary between advice and guidance, and in rolling this work into the boundary review the FCA hopes to be able to consider and develop proposals for more significant reform.
A further update will be provided in a policy paper to be published in autumn 2023.