Sept 15 – Falling for the advice gap

The Financial Advice Market Review under the joint stewardship of Treasury and FCA has been given both a wide scope and a compressed timescale to report. When compared to the lengthy consideration and construction periods given to both the RDR and MMR, this is lightning quick. Because of this the project team, the expert advisory panel and the industry will all have to hit the ground running.

At AMI we want this to be an inclusive review that does not restrict its scope or ambition. We think that for most people the conversations they have around their mortgage are when they are most motivated and engaged with advice and financial services. With the current advice models and rule books these tend to be discussions limited to the funding of the purchase or remortgage and directly related insurance contracts. There is no encouragement from government, regulators, or firms worried about advice risk, to expand the conversations. Indeed the current knowledge and competency frameworks and perimeter guidance make this near impossible.

It is the barriers to good discussions that the review will need to address. In the world of mortgages there has to be clear separation between providing information, fact finding, delivering advice, underwriting and administration including legals. In investments the use of paraplanners, fee based advice, and keeping product providers at a distance are clear.

The current product led approach to the rule book, advisory structures and firms is not serving consumers well. The FCA is right to focus on outcomes and it will only be when the advice process is built around people’s life stages and wider needs that we are likely to get proper traction. Applying another remedy to “simplify” will treat the symptom not the cause. A fundamental rethink of how we approach the consumer and the advice proposition is required.

As borrowing is a prime motivator it might be a good place to lay some foundations.