Ken Davy, founder of major adviser support firms Fintel and SimplyBiz, reviews the FCA’s advice/guidance boundary proposals and questions the wisdom behind some of the plans in an exclusive Guest Column for Financial Planning Today.
I have just been reading an important regulatory publication from the FCA, which has the potential to redefine the financial services framework as we know it.
It is Policy Paper DP 23/5 and goes by the innocuous title of ‘Advice Guidance Boundary Review’.
It has the laudable aim of closing the so-called ‘advice gap’. Astonishingly, however, it includes a suggestion that cross charging subsidies for financial products could be reintroduced.
It is difficult to think of anything that could be more potentially damaging to the interests of the public than reintroducing this kind of anti-consumer opaqueness back into the financial services marketplace.
Such a move would be stepping back in time to the bad old days. It would drive a coach and horses through product transparency, along with almost everything the RDR stands for, and was trying to achieve, as well as compromising the recently introduced Consumer Duty.
That is not to say that some elements of the Paper are not extremely useful and that the objective it sets out of closing the advice gap is not both important and worthwhile.
Indeed, the good news is that this is a Discussion Paper, which gives all of us the opportunity to provide input to help it achieve its objectives. The end goal, however, must be reached in a way which doesn’t undermine all that has been achieved over the years.
The Paper proposes two specific ways to help narrow the advice gap – Simplified Advice and Targeted Support.
In the coming weeks I propose to comment on both of these initiatives in, what I hope, will be a positive context. Unfortunately, however, the FCA’s task of resolving the advice boundary is made all the harder by their insistence on using the term ‘Guidance’, when what they really mean is ‘Information’.
In English, guidance is defined as ‘a recommendation regarding a decision’ in other words ‘advice’, and it is a nonsense to pretend otherwise. This is what everyone understands by the term ‘guidance’ and for the regulator to try to change its meaning, simply creates confusion in the minds of consumers.
I believe this is a fundamental obstacle to the simplification of financial services. Indeed, if an adviser adopted such looseness of terminology in a report to a client, I suspect the regulator would quickly point out the error of their ways.
I urge the FCA, in addition to dropping the appalling suggestion of bringing back cross subsidies, to drop the term ‘guidance’.
They should replace it with what they are really trying to get across to the consumer, which is ‘Information’, and the vital difference between information and advice. This would be an important first step towards the simplification of financial services and, ultimately, the successful narrowing of the advice gap.
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Ken Davy is the founder of SimplyBiz and parent company Fintel, of which he is now a non-executive director. He has more than 50 years’ experience in the retail financial services sector both in public and private companies. Ken has also supported and led charitable organisations as well as having a long-standing involvement in the sporting industry.
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