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Compliance Corner: Financial Conduct Authority

Editorial Staff, 4 December 2020

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The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.

Financial Conduct Authority
Regulatory moves to boost the amount of financial advice for UK citizens is bearing fruit but there is a long way to go in widening coverage, the UK’s Financial Conduct Authority said yesterday. By contrast, wealth management firm Quilter was scornful about the FCA report, and said progress in expanding advice has been “glacial”.

The FCA has published an evaluation of how regulatory changes such as the Retail Distribution Review (late 2012) and the Financial Advice Market Review (2015) have affected the advisory market. The RDR was designed to make financial advice more independent and transparent. The FAMR was intended to make the advice market work better for consumers.

About 8 per cent (4.1 million) of all UK adults have received financial advice, an increase from 6 per cent in 2017; there were 36,400 financial advisors in the UK, up from 35,000 in 2012, the FCA said. Estimated assets under automated advice services – aka “robo-advisors” - increased from £400 million ($538 million) in 2016 to £3.2 billion in 2019.

The FCA noted that 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.

“Our evaluation has found the advice and guidance market is moving in the right direction, but still has further to go. We will play our role to support the market to improve further, in the interest of more consumers. We will use the evidence base this evaluation has given us, along with the responses to our Call for Input on consumer investments, to shape our work to improve the market,” Sheldon Mills, interim executive director of strategy and competition, said. 

The findings drew a frown from Sarah Waring, client and proposition director at Quilter. 

“Growth in financial advice has been moving at a glacial pace, making for very sobering reading when considering the financial wellbeing of the nation according to the latest figures from the Financial Conduct Authority,” Waring said. “It has been sometime since the regulator’s interventions through Retail Distribution Review and Financial Advice Market Review and there is palpable frustration from both the sector and the regulator that more improvements haven’t been made.”

“The supply and demand dynamics within the advice market are complex. Part of the advice gap is the lack of understanding around the value of advice that is on offer and who it benefits. Many people think financial advice isn’t for people like them or they wouldn’t benefit from it and this is a significant barrier to entry. Equally, we know advisors are in great demand and under time-pressure,” she continued.   

“It is clear that the UK remains behind markets like the US where the use of technology and AI is more advanced and they are moving away from the false dichotomy of face-to-face advice versus robo-advice. A hybrid form of advice is becoming increasingly common, which is something the UK will eventually embrace,” Waring said. 

“The FCA is wrapping this next piece of work into its call for input on the Consumer Investment Market. This momentum must not be lost as it is critical for the financial wellbeing of the nation that the regulator, government and industry work together to ensure we can deliver the financial support people need,” Waring added.

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