PIMFA has warned the Financial Conduct Authority’s (FCA) proposals on core investment advice risk being undermined by “unnecessary restrictions.”
The trade association for the wealth management and financial advice industry said while it welcomes and broadly supports the FCA consultation paper on broadening access to investment through the provision of advice, it had concerns.
The FCA consultation, Broadening access to financial advice for mainstream products, closed yesterday (1 March).
The issues centre on the commercial viability of the proposals as currently envisaged, PIMFA said. Placing a lifetime limit on the amount an individual could contribute is one problem it has identified.
Also, the proposed restriction on transfer amounts into a stocks and shares ISA are unnecessary and should be removed in the trade body's view.
PIMFA head of public affairs Simon Harrington said: "The FCA's proposals are well-intentioned and largely strike the right balance between removing some of the barriers to accessing advice and maintaining the value of supporting individuals to make the right decision, or at least one which is broadly appropriate to their circumstances.
"We understand the reasons behind these restrictions - namely a desire to ensure that this service remains transactional - but this ceiling restricts the ability of firms to make what the FCA is proposing a commercially profitable service for firms to offer.
"More broadly, it speaks to a wider concern that we have around these proposals: that it acts as a means to sell ISAs, rather than acting as a service that allows individuals to build wealth with some professional support over the long term."
Harrington added that while the issues are "not insurmountable," the FCA must review the £20,000 limit and transfer ban as a matter of priority if it wants the proposals to succeed.
Provider Aegon has also chimed in on the matter and struck a similar tone. It said it sees the core investment advice proposals as just the first step towards more personalised guidance.
Aegon also warned that the timing may not be right, as interest rates could still be as high as 5% around the April 2024 launch, which would discourage first-time investors from moving out of cash.
Pensions director Steven Cameron added: "We welcome the FCA consultation looking at a new simplified way of advising customers on investing up to £20,000 of excess cash, possibly for the first time, in a mainstream stocks and shares ISA.
"Aegon strongly supports the benefits of advice, but we believe changes are needed to current regulatory requirements to deliver value to those with such modest sums to invest."
Cameron also noted the proposals, as they stand, favour the big players in the industry over smaller firms.
"This consultation around a core investment advice service has a very specific focus which is more likely to appeal only to the very largest of firms with a large customer base currently with excess cash savings. But the cost savings while the service remains under an advice definition are limited," he continued.
"Our hope is this is a first step in a longer journey which will include the FCA and Treasury's holistic review of the advice / guidance boundary, ideally paving the way for regulated firms to offer a more personalised form of guidance. Allowing a guidance service to complement advice could significantly reduce costs while retaining appropriate protection so consumers with smaller sums receive good outcomes."
Alex Sebastian is a freelance journalist
