Financial advice review announced by Government

The FCA has faced criticism in recent years that its Retail Distribution Review programme, intended to improve consumer confidence, has effectively priced out individuals with smaller net worth from accessing professional financial advice.

The changes, allowing access to pension savings, has prompted questions about the suitability of advice.

‘So the Government’s review, which we warmly welcome, must be focused squarely on how to give consumers more power to make better financial decisions at all the important moments in their lives.

Since then the FCA, the Department for Business, Innovation and Skills and the Treasury have spent months discussing whether a long-stop can be introduced.

The Government also intends to consult later in the year on how current arrangements for the provision of free and impartial financial guidance, including the Money Advice Service and Pension Wise, can be made more effective. “Changes in the rules around mortgages and the introduction of the new pension freedoms mean that more people than ever before are looking for or are in need of financial advice”, said Ms McDermott.

Pensioners who are considering making investments other than annuities are already eligible for free financial advice.

Responding to the announcement, Danny Cox, chartered financial planner at investment platform Hargreaves Lansdown, said the government plan to provide everyone with financial advice was unrealistic as not everyone wanted advice. In addition, the re-training costs were considered too high by a few of the banks. However, experts say that the answer to the so-called “advice gap” is likely to be found in new financial technologies such as automated online portfolio managers known as “robo-advisers”. However, officials argue that there was a problem in the market long before the RDR changes, as advice was typically only sought by those with substantial wealth.

“Making sure that our financial services sector supports working people at every stage of their lives is a key part of our long-term plan”, said Harriett Baldwin, economic secretary to the Treasury.

“That’s why we’ve launched a major new review to explore what more can be done to make sure consumers can access high quality and affordable advice so they can make informed decisions with their hard-earned money”.

The review will consider ways to encourage people to seek financial advice and to remove any barriers that may discourage them from doing so, as well as examining the “advice gap” for those who are not significantly wealthy.