On 3 August 2015, City Minister, Harriett Baldwin launched a major new review (the Financial Advice Market Review) which looks to examine how financial advice could work better for consumers, building on the government’s pension reforms which have allowed people real choice and freedom over their savings and given them access to free and impartial guidance. The review will be led by Tracey McDermott (the new CEO of the Financial Conduct Authority (FCA)), and Charles Roxburgh, Director General of Financial Services at HM Treasury (HMT), as co-chairs. They will be supported by a full-time secretariat drawn from staff at FCA and HMT.

In particular, the review will consider the current regulatory and legal framework governing the provision of financial advice and guidance to consumers and its effectiveness in ensuring that all consumers have access to the information, advice and guidance necessary to empower them to make effective decisions about their finances. However, while the main focus of the review will be consumer financial services, it will also look at the provision and effectiveness of advice across retail markets to assess whether differences in regulatory requirements around advice could lead to unintended consequences for both consumers and firms.

Below is a summary of the purpose of the review and also its key planned deliverables in respect of impacting investment firms.

Purpose of the review:

  • To examine the advice gap between people with low and high wealth;
  • To examine the regulatory barriers firms face in giving advice and how they can be overcome;
  • To examine how to give firms more regulatory clarity and how to create an environment that will sustain further innovation and growth;
  • To examine the opportunities and challenges presented by emerging technologies in providing advisory services; and
  • How to encourage demand for financial advice.

Key deliverables/outputs:

  • To deliver reforms for the purpose of facilitating the establishment of a broad based market for the provision of financial advice to all consumers;
  • To create a regulatory environment which gives firms the clarity needed for effective competition and innovation in filling the advice gap;
  • To create principles governing the operation of financial advice;
  • To create measures ensuring standards of behaviour for firms across all types of financial advice markets are in accordance with those principles;
  • To create proposals as to whether the regulatory perimeter for financial advice should be amended, taking into account European legislation; and
  • To conduct an examination of the role that might be played by regulatory carve-outs such as a so called safe-harbour.

In its guidance note, the HM treasury stated that is also possible that a number of the review’s recommendations could have applicability in other financial services markets and could be considered further. Even though the review is still at an early stage, investment firms should keep track of its developments and aim to function within its proposed standards, having consumers’ best interest in mind.

Should you require any further advice or information on the above, Cleveland & Co, your external in-house counsel, are here to help.