The government and Financial Conduct Authority's plans to redefine the advice-guidance boundary can only bring positive results for the consumer and for the UK's ambition to be a world-leading financial centre.
But how is it going to actually be implemented? And what impact will it have on firms on the ground that are rolling the new guidance out?
The FCA is seeking views on three specific proposals:
- Clarifying the boundary; when firms can give consumers support without giving regulated financial advice.
- A new approach allowing authorised firms to provide targeted support tailored to groups of people in similar circumstances.
- A new form of simplified advice that makes it easier for advisers to provide affordable personal recommendations to clients with more straightforward needs and smaller sums to invest.
We know already that changes in regulation and legislation have a direct impact on how firms structure their advice models and their advising structures.
One key difference in strategy for firms is how they approach their recruitment and business growth, factoring in the changes in legislation.
We have been working with firms who have been gearing up for this transition for some time and implementing different advice models across their businesses, regardless of the eventual outcome. Firms often see value in having a tiered approach to their advice offering.
By segregating the levels of advice and the categories that different customers fall into, it enables them to create different working models and fit their advice model around it.
We work with firms that operate a more restricted offering for the mass market, but have a restricted-plus or access to the wider market offering for those clients that require it.
The latter requires a deeper level of understanding and technical competence and a more experienced adviser to handle it and so firms can have differing tiers of advisers, from junior/new entrants to senior financial planners.
This could be extended to offer a guidance only offering. Of course, the robo-advice model is something that has also been evolving over recent years, which, in the main, serves the less complex cases or the mass market.
The more hands-off approach, which widens the accessibility to more who need it, could also be used in offering a guidance-only approach.
We have other firms who are operating a fixed fee model, which they find works for their business and their clients and assists them in offering a standardised service to a wider market.
This enables them to bring in advisers who are focused on serving clients, with a structured and standardised approach to achieving client-focused goals. This model could also be applied to work for simplified advice.
Financial coaching is another growing offering and we work with many businesses and individuals who have qualified as financial coaches to give that extra depth to the support they can give their clients.
They work by educating and empowering their clients to understand how to manage their money and create plans to achieve their financial and wealth goals. But they are not bound by the same regulatory requirements as regulated financial advisers.
With the review we may see more of this and with an increased uptake of guidance this could play in very nicely to help businesses strengthen how they are supporting their clients and securing that relationship.
