The Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR) aimed to improve consumer outcomes from financial advice and guidance. We are reviewing their impact on the market to date, and assessing how the market may develop, to ensure it meets consumer needs now and in the future.
January 2020 update
Further to our July 2019 update, below, we explain further progress on our work and set out next steps.
We expect to publish our final RDR/FAMR Review report later in the year.
In August 2019, we surveyed a sample of approximately 400 firms. We asked them to provide information on their advice services, including business models and strategies, target customers, charging structures, future plans, use of technology and any recent innovations.
We received almost 300 responses. We are now analysing these data, and will use them, together with other data we collect, to inform our view of how services are developing to serve consumers now and in the future.
We have commissioned qualitative research on how consumers interact with the market. This research will explore consumers’ view of their needs for support with financial issues, how they go about getting that support, and their experiences.
Together with the quantitative findings of our Financial Lives survey, this will inform our view of the current state of the market and how it is developing from a consumer perspective.
We will continue with our consumer research and the analysis of firm data. We will assess whether there are any gaps between the products and services firms are offering and what consumers need and want.
We will also continue to work closely with other organisations and stakeholders. We are particularly keen to understand the impact technology has had on the market and the potential for it to help meet current and future consumer needs. We are keen to hear from firms about their plans to use technology in making efficiencies, in offering innovative services, and what challenges and barriers they are facing in doing so.
We want to explore further the potential for new services to emerge in the market. We are interested in both alternative advice services and unregulated information services. We want to understand more about the barriers to providing alternative services. For instance, is there a lack of demand for new services or are there economic or regulatory barriers that prevent them from emerging?
Links to other work
The review is part of a broad package of work on retail investments and pensions / long-term savings sectors. Work already underway seeks to address a range of issues relevant to the RDR/FAMR review, including pension transfer advice, competition in the non-workplace pensions market, and suitability of advice, particularly in relation to high risk investments.
We want to hear from firms about the effect open finance could have on the market and what role we may be able to play in helping this. In the beginning of 2020, we plan to host roundtable events with a number of trade bodies and firms to discuss open finance and how it may affect the market to benefit consumers.
July 2019 update
In July 2019, we gave an initial update on our work.
We published a Call for Input in May 2019, asking for views on the issues that stakeholders thought we should consider as part of our review. We received 57 responses from a range of consumer bodies, trade bodies and firms. We held a series of stakeholder events across the UK to gather further input and feedback. We have also met with several trade bodies, firms and other interested parties.
Some of the main themes that have emerged so far include:
- Access to appropriate services: a number of stakeholders have said that not all consumers have appropriate access to a wide range of services to help them in their financial planning, particularly those with smaller amounts of money to invest. They say that this problem has worsened in recent years and that regulatory costs have contributed to this.
- Regulatory perimeter: the boundary between providing guidance services and regulated advice is not clear to all stakeholders. We have been told that this can result in some firms feeling unable to provide potentially useful information to consumers if they feel there is a risk that it will be perceived as regulated advice.
- Consumer engagement: stakeholders said that consumer education in financial planning issues could be improved to encourage engagement with advice and guidance services.
- Innovation: many stakeholders said that consumers value face-to-face advice and that alternatives (including online services) are less popular. Others said that new forms of advice and guidance are reaching more consumers, but that more work needs to be done to incorporate technology into the market to help consumers. Another suggestion on innovation included the idea of developing streamlined advice processes for simpler products.
This is a summary and does not reflect all the points raised. We thank stakeholders for taking the time to respond to our Call for Input and engaging with us through our events and meetings to date. We are not commenting at this stage on the various issues raised, but are using the feedback we received to help focus our continuing work.
As the feedback we have received broadly supports the proposed scope we outlined in the Call for Input, we will now proceed with our review in line with that scope. It would not be an efficient use of our resources to focus in this review on areas where there are other FCA projects that are either underway, or have recently been completed in these areas. Our work will be informed by these other projects, but we don’t want to duplicate work in these areas. Therefore, we have decided not to include certain issues in our review, for example:
- requirements relating to defined benefit pension transfers
- changes to the award limits for the Financial Ombudsman Service, including consequential impacts on the Professional Indemnity Insurance market
- changes to how the Financial Services Compensation Scheme is funded
All the feedback we have received about areas we are not including in our review has been fed into those projects, so that it can be considered as part of that work.
Over the next months we are planning to conduct additional research. This will include information on the industry and consumers.
- Industry data: we will survey a selected sample of firms, to collect additional data about the industry, at the beginning of August. They will have until the end of September to complete the survey. We will also review data we already hold from firm reporting, and from FCA market studies and supervisory work.
- Consumer data: we plan to gather consumer information through:
- the Financial Lives Survey (FLS), which is an extensive survey of consumers based on face-to-face and online interviews about their experiences of financial products and services
- separate qualitative consumer research to support the quantitative data in the FLS
Background for the Call for Input
The RDR was launched by our predecessor, the Financial Services Authority (FSA), in 2006 with most of the rules it introduced taking effect in 2012.
The aim of the RDR was to establish a more resilient, effective and attractive retail investment market that consumers had confidence in and trusted. It made several significant changes to the way investment products are distributed to retail consumers in the UK. The RDR raised the minimum level of adviser qualifications, changed the way charges and services were disclosed to consumers, and banned the use of commission to pay for advice. In 2014, we published the first phase of the post-implementation review of the RDR.
FAMR was launched jointly with HM Treasury in 2015 and built on the work of the RDR. The objective of FAMR was to identify ways to make the UK’s financial advice market work better for consumers. The review had a wide scope and looked across the entire financial services market to assess the accessibility of advice and guidance to help people with their financial decision-making.
FAMR’s final report in 2016 included a series of recommendations for FCA, HM Treasury and other organisations. In June 2017, we published a baseline set of market indicators which serve as a benchmark against which we can track changes in the advice and guidance market over time. The FAMR element of the current RDR/FAMR evaluation is conducted jointly with HM Treasury.
14/01/2020: Information added January 2020 update published