Regulations may be "channelling people to an advice approach they might not need", the Financial Conduct Authority (FCA) has acknowledged.
On Wednesday, the financial watchdog published a call for input, asking for feedback on how it should approach its review of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).
The report asked advisers to consider 24 questions - set out at the bottom of this article - based largely on consumer needs, the provision of advice, and guidance services and market changes.
In an interview with FCA director of policy Nisha Arora, Professional Adviser specifically inquired into the paper's 15th question, which asks if there are points where the regulatory system may drive too many people to seek advice. Arora said the debate came back to user needs.
She went on to say the watchdog believed its regulation was "channelling people to an advice approach which they might not actually need", adding the FCA did not want to create a market where people started off with the assumption that everyone needs the same thing.
"At times, it may be that regulation actually pushes people into seeking something that might not be the most suitable thing for their needs," she said.
"What we know is advice and guidance are absolutely both critical for consumers as they make their decisions. But what that might mean is that consumer situations and consumer segments may well differ."
She added that regulation should be there to help and the FCA would take a look at the areas where it may in fact be hampering in a way that was unnecessary or disproportionate.
'Very much open'
The director of policy for the regulator also said there were no expectations of outcomes at such an early stage in the review process, saying the watchdog was "very much open" and that it wanted to engage firms, consumers and industry bodies alike.
She said this call for input was designed to help the FCA figure out what areas it needed to work on and to decide what further questions needed to be asked.
The deadline for the call for input feedback is 3 June 2019, after which the regulator will carry out additional research over the remainder of the year before publishing its final review in 2020.
The FCA's 24 questions for advisers
Q1: Is there any other evidence we should consider in our review of the RDR and FAMR outcomes and indicators in Annex 1 and Annex 3?
Q2: How do different groups of consumers access appropriate advice and guidance? Does this vary by financial need or consumer group?
Q3: Are there any barriers to consumers accessing advice or guidance that meets their needs or to firms providing them?
Q4: Do consumers have the right information to compare advice and guidance services and to shop around? How easy is it for them to compare services?
Q5: What barriers exist to making advice or guidance services more affordable?
Q6: Do advice and guidance services offer sufficient quality and choice to meet the needs of different consumer groups? Are any consumer groups underserved?
Q7: Do consumers have confidence and trust in advice and guidance services and do these services address their needs?
Q8: Do consumers who take advice or use guidance services get better outcomes than those who do not? If so, how, and if not, why not?
Q9: What are the key advice and guidance services offered in the market and do they meet the needs of all consumer groups?
Q10: What new business models are being developed and how will they meet consumer needs?
Q11: What aspects of advice and guidance services do consumers value and why? Does it vary by consumer group or financial need?
Q12: What emphasis do consumers place on the cost of advice and guidance, against other elements of value for money?
Q13: Are there any barriers to effective competition between firms offering advice or guidance?
Q14: Are the rules and guidance around advice and guidance working well?
Q15: Are there points where the regulatory system may drive too many people to seek advice?
Q16: Does regulation support the development of advice and guidance services, including automated advice services, that work well for firms and consumers? How can it be improved?
Q17: Did FAMR or the RDR result in unintended consequences that have caused consumer harm?
Q18: How have consumer needs for advice and guidance services changed since the RDR and FAMR initiatives were introduced?
Q19: Are there any new or emerging trends (for example, the ageing population and increased pension flexibility) that will lead to further changes in consumer demand for advice and guidance services?
Q20: What changes to the market might be needed to encourage consumer interaction with, and good outcomes from, advice and guidance services in the future?
Q21: What market developments have taken place since the RDR and FAMR reviews? What impact have these had on consumers, the market and competition?
Q22: What future market trends do you expect to see and what do you expect their effects will be?
Q23: What opportunities and barriers are there for developing advice and guidance services in the future?
Q24: What emerging risks to consumers do you see in the market?
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