For those of you who have not had time to read HM Treasury/FCA final report on the Financial Advice Market Review (FAMR), the below is a high-level summary of the key takeaways:

• Amending ‘advising on investments’ Art 53 RAO: The review found that firms are not developing as many financial advice/guidance/assistance products that HM Treasury/FCA would like and apparently the reason is that firms are concerned that they may be ‘advising on investments’. As such, FAMR recommends that HM Treasury consult on amending Article 53 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to restrict regulated advice back to ‘investment advice’ as that term is used in MiFID I (as to be amended by MiFID II), i.e. that advice will only be that which involves a personal recommendation.  The recommendation explicitly states that firms providing non-personal recommendation regulated advice, generic advice, investment research and general recommendations, are to no longer be considered to be providing advice under Article 53 RAO. It is acknowledged in the final report that a substantial number of firms who currently have this permission from the FCA, will no longer need it. It is stated in the final report that HM Treasury will consult on the changes with a view to implementing them in “early 2017” (and before MiFID II implementation in Jan 2018).

• Additional guidance on what amounts to regulated advice and what does not: Despite the FCA producing Finalised Guidance 15/1 (Retail Investment Advice: Clarifying the boundaries and exploring the barriers to market development), the market apparently still remains unclear of the boundary between providing non-advisory services and providing advisory services. Therefore, additional guidance is recommended to be issued distinguishing between advice and other forms of assisting clients to make investment decisions. It is recommended that new terms be adopted to replace ‘advice’ and ‘guidance’ so as to more clearly distinguish between what is regulated and what is not.

• Making ‘simplified advice’ models more proliferant: The FAMR considers that more technological, automated advice models need to be developed to plug the ‘advice gap’. Therefore, it is recommended that guidance is issued to clearly set out how ‘simplified advice’ models need to comply with regulatory requirements. In addition, the FCA is going to set up an ‘Advice Unit’ (similar to its Project Innovate for the FinTech sector) to help firms develop automated advice models. The final report states that the FCA will ensure that even with MiFID II implementation, that simplified advice models can continue to exist.

• Clarification on scope of ‘cross-subsidisation’: The final report contains a recommendation to clarify what is intended to be prohibited and permitted by the Retail Distribution Review cross-subsidisation rules for vertically integrated firms. In particular, it will be clarified what is meant by cross subsidisation not impacting “in the long term” so as to make it clear that it can have an impact in the short term.

• Changes to requirements for suitability reports: The final report contains a recommendation to make suitability reports much shorter and to reduce the time that needs to be taken to prepare them. In addition, it will be made clearer what information needs to be included in Fact Finds.

• Employers to be able to give advice: It is recommended that employers be able to give financial advice to their workforce without giving regulated advice and a new Fact Sheet is recommended to be developed.

• Adviser charging payment periods: The final report contains a recommendation to allow customers to pay the adviser charge over a longer period than that originally included in the RDR rules (subject to the Consumer Credit Act which may apply in certain circumstances).

• Commission payments on non-advised sales of pension annuity products to be banned: This is currently being considering under Consultation Paper 15/30 (Pension reforms – proposed changes to our rules and guidance). The Policy Statement is expected in April.

• Changes to calculation of FSCS Levy: To assist financial advisers with the costs of providing advice (i.e. the Financial Services Compensation Scheme levy) it is recommended to change how the FSCS levy is calculated and funded including so that it takes into account more risk-based factors.

• No change to bringing claims before the Financial Ombudsman Service: To give greater certainty to financial advisers, the FAMR looked at whether a long-stop date should be introduced for when a complaint about financial advice could be made (the time period that was considered was 15 years). It was not recommended to proceed with any long stop date. Instead, the FOS is going to give clearer guidance and case examples to the market.