FAMR: Report is Out
In a nutshell the FCA report seeks to address three main concerns as this extract details:
We believe that the RDR has brought about a positive step change in the quality of advice available to those with larger amounts to invest. However, steps need to be taken to make the provision of advice and guidance to the mass market more cost-effective. We make a number of recommendations intended to allow firms to develop more streamlined services and engage with customers in a more effective way. These include a proposal that the FCA should set up a dedicated team to help firms developing mass-market automated advice models to bring these to market more quickly, and that HMT should consult on amending the definition of regulated advice.
People often lack confidence when faced with decisions about their finances. We propose a number of measures to help consumers engage more effectively with advice. These include making their own information more easily available to them and those that advise them; the development of nudges to encourage customers to seek support at key life stages. The report also recommends measures to help employers to give more support to their staff on financial matters.
3. Liabilities & Customer Redress
Many advisers told us that concerns about future liability are preventing them from giving advice today. We recognise that concern but also the importance of consumer protection in building confidence in the sector. We make recommendations to increase clarity and transparency about the way in which the Financial Ombudsman Service deals with consumer complaints. We also make recommendations in relation to the funding of the FSCS to assist advisers struggling to predict and budget for the levy they have to pay.
It is the view of the FCA that, taken together, this package of measures has the potential to promote a real improvement in the affordability and accessibility of advice and guidance to people at all stages of their lives.
The report goes on to make 28 recommendations which the FCA hope will help address these areas and is looking to make great progress over the next 12 months through more in depth working with the industry through consultation. The recommendations show however that there is still a good way to go before the advice industry has the clarity it seeks.
DSW’s View is Clear
SO WHAT DID WE CONCLUDE?
The FAMR is a very timely report and will hopefully be the catalyst for the introduction of many new service offerings for savers and investors.
There is still undoubtedly a need for the traditional Financial Adviser service where this is both desired and affordable by clients. Those meeting ‘wealth’ criteria generally fall into this bracket and are willing to pay the professional fees associated with full advice and as a result providers can afford to supply them. For the mass market of smaller investors however, there are significant challenges to overcome to balance client affordability and provider profitability.
We live in a digital age where accessing information is done in real time and at pace, through our devices. Financial product information should be no different, but understandably, many smaller investors might value the comfort of being supported in their digital decisions by having access to an affordable, simplified advice service. The industry has really struggled to make the shift from only offering expensive face to face ‘personal recommendation’ advice models, to a blend of solutions which allows customers to deal in the way they want to, at a price they can afford and quite frankly is fair for the amount of advice they really need.
If the industry providers as we know them today do not respond positively to this challenge, they will not be the suppliers of the future.
Providers must not lose sight of keeping customers at the heart of their business models and should focus on finding out how the customer wants to do business. Let’s face it, not all financial products are complex and not all customers feel the need to have to sit down for a 2 hour face to face consultation to invest a few £000 in a simple investment product. Accepting appropriate safeguards the industry needs to make it easier for customers to invest.
We are pleased to see that as a result of the influence of FAMR many of the main providers are now beginning to address this challenge, all be it tentatively. A significant number are re-entering the mass-market investment arena with emerging offerings covering a broader range of services which includes ‘personal recommendations’ (like the traditional IFA), ‘simplified advice’ (such as those offered through call centres) and digitally based ‘roboadvice’ (via on-line information and helpful decision trees).
Perhaps the prediction of Ben Goss the CEO of Distribution Technology will come true
“Digitally supported financial advice will be the norm within three years if the Financial Advice Market Review recommendations are delivered. The Financial Conduct Authority appear intent on addressing the barriers that prevent serious application of technology to the advice and suitability process.”
A Learning Perspective
We believe this range of new services offering will pave the way for the training of thousands of new staff who will need to become fully competent to support customers at the level they need it. The highly qualified IFA will still have a vital role for providing ‘personal recommendations’ to the wealthy but well trained appropriately qualified call centre staff and on-line support services will surely become a norm in the future, and so they should.
With the on-set of the new apprenticeship levy in 2017 we are confident that all major financial services organisations will begin to look at their service offerings with fresh eyes and plan the training for their staff.
DSW are poised and ready to respond – call us on 01302 760 008 or fill in the form below if you need help in designing a fit for the new world training and development programme. The FAMR is a very timely report and will hopefully be the catalyst for the introduction of many new service offerings for savers and investors.