FCA Consumer Duty reforms provide opportunity to clarify the advice/guidance boundary

The deadline for responses to the FCA’s latest consultation paper on the new Consumer Duty closed yesterday.

In its response, AJ Bell argues the new Consumer Duty provides a clear opportunity to revisit the advice/guidance boundary.

The Consumer Duty will represent a step-up in regulatory standards, requiring all financial services firms to ‘act to deliver good outcomes’ for retail customers.

Ensuring financial services firms have confidence to communicate with non-advised customers without straying into advice will be crucial for the Duty to be effective.

Shift to outcomes-based regulation must reflect the fact the market is not homogenous and different propositions cater for varied customer needs.

Regulatory layering and an increase in spurious compensation claims must be avoided.

Tom Selby, head of retirement policy at AJ Bell, comments: “Perhaps the biggest opportunity the Consumer Duty – and the shift to outcomes-based regulation – provides is for the FCA and the industry to scale up support for people saving and investing for their future.

“In the retirement market in particular, people often face complicated choices when deciding how much to save, where to save it, how to invest and ultimately how to turn their pot into an income that lasts for 30 years or more.

“Those who can afford regulated advice are already catered for. For those who can’t afford advice or prefer to invest themselves, Pension Wise provides an extra layer of support and information.

“However, Pension Wise appointments are one-off events. Providers like investment platforms, who have an existing relationship with their customers, are often in the best position to offer ongoing guidance to help savers make good decisions and avoid poor decisions.

“But firms’ ability to offer this help is constrained by a lack of clarity around the boundary between guidance and advice. Firms often have a very limited appetite for intentionally or unintentionally breaching perimeter guidance, which stifles innovation in the provision of support to customers.

“This issue needs to be debated and addressed during the consultation phase if the Consumer Duty is to work as intended.”