Guidance

Financial Advice Market Review: Terms of Reference

Updated 11 April 2017

1. Objectives

The review will examine

• the advice gap for those people who want to work hard, do the right thing and get on in life but do not have significant wealth;
• the regulatory or other barriers firms may face in giving advice and how to overcome them;
• how to give firms the regulatory clarity and create the right environment for them to innovate and grow;
• the opportunities and challenges presented by new and emerging technologies to provide cost effective, efficient and user friendly advice services; and
• how to encourage a healthy demand side for financial advice, including addressing barriers which put consumers off seeking advice.

2. Scope

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.

The review will also consider the interplay between the regulatory framework for advice and the role of the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS) in redress. The initial evidence gathering will have a broad scope before narrowing down to consider those areas where the so called advice gap may be most acute.

The initial evidence gathering will request examples of problems in obtaining advice in the following markets:

• investments, savings, pensions, and retirement income products (including annuities)
• mortgages (including Help to Buy and equity release) and consumer credit
• general insurance

The review will also seek evidence from consumers about the barriers they face in seeking advice; the value they place on it and how easy it is to understand where advice can be found and what it means.

While focusing on consumer financial services and products, the review will also look at the provision and effectiveness of advice across retail markets to assess whether differences in regulatory requirements around advice lead to unintended consequences for consumers and firms.

It is also possible that a number of the review’s recommendations could have applicability in other financial services markets.

3. Outputs

The review will come forward with:

• a package of reforms to:
  • empower and equip all UK consumers to make effective decisions about their finances
  • facilitate the establishment of a broad based market for the provision of financial advice to all consumers
  • create an a regulatory environment which give firms the clarity they need to compete and innovate to fill the advice gap
• a set of principles to govern the operation of financial advice
• measures to ensure standards of behaviour for firms within all types of financial advice markets are in accordance with those principles
• proposals as to whether the regulatory perimeter for financial advice should be amended, taking into account European legislation
• an examination of the role that might be played by regulatory carve-outs such as a so called safe-harbour
• a consideration of the proportionality of rules and their impact on affordability and availability of financial advice and products
• indications of
  • the resources needed for implementation of these proposals
  • a framework for evaluating how successful reforms have been in closing the advice gap, post implementation Initial work and evidence gathering will be undertaken over the summer with a view to producing a consultation document in autumn 2015. The consultation exercise will close by end 2015 with a view to producing proposals ahead of Budget 2016.

4. Leadership

“The review will be led by Tracey McDermott, who will take over as acting CEO of the Financial Conduct Authority (FCA) on 12 September, 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.

The review will have a separate expert advisory panel. The panel will be led by Nick Prettejohn, Chairman of Scottish Widows Group, and will comprise around 12-15 senior figures representing financial services providers, financial advisors and consumer representatives.

Members of the panel will act in a personal capacity rather than represent the views of their firm/organisation. The panel will feed into the work of the review, but all executive decisions of the review will be the responsibility of the leadership team.