Earlier this year, the Financial Conduct Authority set out ambitious ideas in its Advice Guidance Boundary Review (AGBR), which could prompt a pivotal transformation for advice in the UK.
Introducing simplified advice and targeted support to the UK market on a large scale needs a careful balance.
This balance involves offering quality advice and being operationally efficient, while also regulating effectively without overwhelming the industry.
A similar balance is being struck in Australia via its ongoing Quality of Advice Review (QAR). The QAR heralds a significant shift towards simplification and efficiency, and has sought to redefine the benchmark for financial advice.
Given Australia has a comparable advice gap and overlapping regulatory frameworks, it is worth taking insights from its Quality of Advice Review
Looking at it in broad terms, Australia boasts approximately 15,600 advisers for its 26 million residents. In contrast, the UK’s population of 67 million is more than double that of Australia’s, yet at around 30,000, it doesn’t have quite twice the number of financial advisers.
Also consider that Australia’s well-established superannuation funds industry provides comprehensive coverage, addressing the retirement savings needs of a significant portion of the populace, thereby reducing the individual reliance on private financial advice.
However, given Australia has a comparable policy issue (an advice gap) and overlapping regulatory frameworks, it is prudent to take insights from the QAR when considering how the UK can develop and foster streamlined advice services.
In the UK, the regulatory landscape is often seen as the gold standard, yet it is complex
As part of the QAR, the Australian government pledged to update the regulations surrounding the duty of ‘acting in the best interest’. This includes enhancing legislative frameworks to support advice that is scaled or limited in scope, particularly when the adviser possesses only a narrow range of pertinent information.
The relevant Act mandates that if client information appears to be incomplete or inaccurate, advisers must make reasonable inquiries to obtain complete and accurate information. The proposed change could require only ‘information necessary to provide appropriate advice’, streamlining the process and ensuring advisers gather only what is essential for that specific advice.
This allows advisers to prioritise the consumer’s specific needs, offering sound and contextually appropriate advice. This approach is generally expected to be more straightforward and require less data than the comprehensive process of delivering holistic financial planning.
Introducing simplified advice and targeted support to the UK market on a large scale needs a careful balance
In the UK, the regulatory landscape is often seen as the gold standard, yet it is complex. These intricacies have inadvertently erected barriers that limit the ability of advisers to serve a wider audience.
It’s clear a segment of potential clients faces financial barriers to accessing advice, while others are reluctant, believing straightforward queries to their providers should yield immediate answers.
Simplified advice or targeted support may provide a solution to both dilemmas, provided by less qualified personnel for ‘basic’ enquiries where customers still anticipate an element of personalisation.
The goal should be to support clients in making informed decisions, rather than relying on complex, legalistic processes and materials that primarily serves to protect the adviser from potential liability issues or to meet regulatory requirements.
The QAR suggested advice providers should be obliged to keep thorough documentation of the advice they dispense and to furnish a written summary only if a client requests it
The QAR revealed a significant portion of the expenses associated with delivering advice could be traced back to the creation of ‘Statements of Advice’, which often extended beyond 41 pages.
In light of this, the QAR proposed a shift away from these stringent documents. It suggested advice providers should be obliged to keep thorough documentation of the advice they dispense and to furnish a written summary only if a client requests it.
Following the recent introduction of the Consumer Duty, the FCA may consider incorporating a similar simpler record of advice within the realm of simplified advice.
Given that such advice is more focused and requires recording fewer variables and inputs, simpler forms of documentation might be adequate for presenting to the customer.
Drawing inspiration from Australia’s QAR proposals could offer inspiration for the UK’s regulatory challenges and the AGBR proposals. Ultimately, we need the AGBR to be a progressive initiative that simplifies protocols for new simpler standards of advice and customer support.
Steven Levin is chief executive of Quilter
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