The annual report updating on the progress of the Financial Advice Working Group against the recommendations of the Financial Advice Market Review [FAMR] was published on 10th April 2017.
It is an accessible paper at only 15 pages and for those operating in the advice sector, well worth taking some time to review.
Here are a few of the items which caught our eye:
Change in Definition of Advice:
This was one of the key recommendations of the FAMR Review. Following a consultation in Autumn 2016, the Government last month announced that this change in definition would be implemented.
The new definition, which aligns to MiFID II, limits ‘advice’ to the provision of a personal recommendation [as defined by MiFID II]. There is no change for unregulated firms: they may not provide any form of regulated advice without the correct authorisation.
This new definition and supporting legislation will take effect from 3rd January 2018. The FCA has published a short explanatory note alongside the government response [follow this link to access the FCA note]. In December, we expect to see a Policy Statement confirming Handbook changes and further guidance on personal recommendations, the treatment of insistent clients, as well as guidance arising from the experience of the FCA's Advice Unit.
In September the FCA published finalised guidance supporting firms offering ‘streamlined advice’ on a limited range of consumer needs (recommendation 4) and also clarifying the fact find process (recommendation 10). These have been combined with material from previous guidance, also includes material from FG12/10 and FG15/1 covering adviser charging, complaints and redress, professional standards, appropriateness and discretionary investment management. The finalised guidance can be viewed as FG17/8 here.
A further FAMR was for the FCA and The Pensions Regulator (TPR) to develop and promote a new guide to set out what help employers and trustees can provide on financial matters without being subject to regulation. Follow the link to view the finalised Employer and Trustee Guide.
Smarter Consumer Communication and Suitability Reports
Following this recommendation, the FCA worked with various sector bodies. A guidance notes was prepared and issued in December 2016 by the Association of Professional Financial Advisers, which you may be aware of. You can access the note here.
New terms to describe ‘guidance’ and ‘advice’
A FAWG subgroup has been working on a list of potential new terms. This has been vigorously tested with consumers. A report has been submitted to the FCA and HMT for review – we await further output on this.
Rules of Thumb and Nudges
Similarly a subgroup of the FAWG has developed a set of rules of thumb and principles for nudges that can prompt people to take action to improve their financial well-being. Again the report of their findings sits with the FCA and HMT. It appears that this work may be linked to the current review of the need for a Single Body for Public Financial Guidance. There is a proposal that the Single Body should take ownership of these rules of thumbs/nudges.
Financial Ombudsman Services
FOS has been holding ‘Best Practice’ roundtables around the country, offering an opportunity to discuss relevant issues. FOS has also committed to make more data available to financial advisers including 6-monthly data in its six-monthly data in its regular newsletter ‘ombudsman news’.
The FCA and HMT were tasked with developing indicators to monitor the development of the advice market. The Baseline Report was published on 30th June 2017. These high level indicators will be used to monitor developments and assess the impact of the FAMR recommendations, when conducting a review of the outcomes of FAMR, planned for 2019. The RDR Post Implementation Review, due this year, will now be run alongside this review in 2019.
The indicators include measures of consumer use of advice and guidance (the ‘demand side’) along with measures relating to the provision of these services (the ‘supply side’). A full list can be found in Annex E of the Baseline Report.