FCA proposals to improve access to financial advice on investing into mainstream products

background

On 30 November 2022, the Financial Conduct Authority (“FCA”) published a Consultation Paper (the “Consultation Paper”) CP22/24 on proposals to broaden access to financial advice for mainstream products. These proposals are part of the FCA’s wider effort to make it easier for consumers to access financial advice and to ensure that the advice they receive is in their best interests.

The Consultation Paper is proposing…

a more simplified financial advice regime, which aims to make it affordable for consumers to obtain financial advice when investing in certain mainstream products, such as stocks and individual savings accounts (ISA) wrappers. The FCA’s goal is to ensure that consumers receive the required support and advice to fully understand the investment risks they are exposed to and have confidence that they are protected from a regulatory perspective. Further, the proposed changes will address the challenges and barriers that firms may have when providing advice to consumers who have simpler needs or wants to invest lower amounts.

The firms in scope of the new proposals are:

• Consumers and consumer organisations
• Authorised firms providing investment advice
• Authorised firms holding related permissions
• Trade bodies for the investment sector
• Authorised firms communicating financial promotions
• Accredited bodies
• Financial advisers
• Investment platforms
• Retail banks

Summary of the fca’s proposals

The FCA’s proposals include:

1. Limit the advisor’s recommendations to a set of mainstream investments and exclude high-risk investments.
2. A new definition of core investment advice will be created in the FCA’s Handbook.
3. Reduction in the existing qualification requirements to reflect the lower risk of the narrow scope of core advice, with a focus on the necessary technical and regulatory mainstream investments.
4. Allow greater flexibility in charging structures and enable consumers to pay for transactional advice in instalments.
5. Restructure COBS 9A suitability requirements to reflect the narrower scope and complexity of this advice relevant to the decision that consumers will make.
6. The FCA has also highlighted that the new Consumer Duty will be applicable to the new core investment advice regime.

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next steps

 The Consultation closes on 28 February 2023. The FCA aims to publish the policy statement and final rules and guidance in spring 2023, with the aim to implement the proposals before the end of 2023/24. Provisionally, firms can start offering core investment advice in April 2024.

When the new core investment advice regime is implemented from the beginning of April 2024, firms will need assistance to assess whether their advisory services or part of their advisory services would fall into the new ‘investment advisory services’ category and will need to construct new contractual documents in order to offer this service.

We can help firms assess the impact of the proposals on their business models to determine whether they will need to make changes to comply with the new rules and compose new contractual documents to prepare for implementation.

To read the full Consultation Paper click here. For more information on the implementation of the FCA new core investment advice regime, Cleveland & Co External in-house counsel™, your specialist outsourced legal team, are here to help.

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