Call for input on evaluation of the Retail Distribution Review and the Financial Advice Market Review

July 2019 update

Here we update on our work so far, and set out our next steps.

Stakeholder feedback

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.

Next steps

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​​​​​​

We will publish the next update on our work in early 2020, and further updates as it progresses. We expect to publish our final report in 2020.

What you can do

If you have further information you would like us to take into account, email: [email protected]. Please also use this email address if you would like a meeting to discuss your views on our review.

Background for the Call for Input

The RDR

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. 

The FAMR

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. 

Who this applies to

This work will be of interest to:

• consumers and representative consumer bodies
• firms, professional associations and trade bodies that work in retail financial services
• businesses which support those firms, including consultants and IT suppliers