The Financial Conduct Authority (FCA) and the Treasury have published a Financial Advice Market Review (FAMR) progress report. Here are the top ten points you need to know…
FAMR launched in August 2015 in light of concerns that it was not working well for consumers and sought to figure out how the industry could stimulate the development of affordable and accessible financial advice.
It issued 28 recommendations for further work by the regulator, Treasury and industry.
Here are the ten key points to take away from the progress report…
1. The Financial Advice Working Group (FAWG)
The Financial Advice Working Group (FAWG) was set up in June 2016, incorporating members from the FAMR Expert Advisory Panel and has produced a number of reports.
Since last year it has worked with the Money Advice Service to develop a guide of the top ten ways to support employees' financial health in the workplace, which will be fully available later in 2017. However, a ‘beta' test site is currently available.
The subgroup has also been developing a list of consumer friendly descriptions for ‘guidance' and ‘advice', while leading a taskforce to develop rules of thumb and nudges aimed at prompting consumers to improve their financial well-being.
2. Ongoing responsibility for rules of thumb and nudges
One recommendation by FAMR was for the Treasury to assign ongoing responsibility for the progress of rules of thumb and nudges to an appropriate body.
The government is currently reviewing responses to the plan to consolidate the financial guidance it sponsors into a single financial guidance body (SFGB). It is also considering whether the SFGB would be the most appropriate body to take on this responsibility.
3. FAMR working alongside MiFID II
Another recommendation was to should ensure the Markets in Financial Instruments Directive II does not undermine the FCA's ability to follow through proposals designed to give firms the confidence to deliver streamlined advice.
The FCA is currently working with the Prudential Regulation Authority (PRA) to ensure it does not undermine these efforts and is set to publish implementation measures by mid-2017, prior to MiFID II coming into effect on 3 January 2018.
4. FCA Advice Unit to work with another cohort of firms
The Advice Unit set up under the regulator's Project Innovate, provides regulatory feedback to a selection of firms developing automated advice models.
The unit is soon expected to start working with a second cohort of firms. It will also publish tools and resources for advisory firms informed by its work with the individual firms.
5. Employer and trustee factsheet
It was recommended that the FCA and the Pensions Regulator develop a factsheet for employers and trustees to set out what support they can provide on financial matters without becoming subject to regulation. The factsheet has now been developed and was today published for consultation.
6. Employer-arranged tax exemption
FAMR recommended the Treasury should look into improving the existing £150 income tax and National Insurance (NI) exemption for employer-arranged advice on pensions.
The Treasury is legislating to increase the existing income tax and NI exemption as part of the 2017 Finance Bill, increasing it to £500. It will come into effect this month.
7. Pension Advice Allowance
Following the recommendation that the Treasury should consider ways to let consumers access a small part of their pension pot before the normal minimum pension age for advice, the £500 Pension Advice Allowance comes into effect this month.
8. FSCS funding
FAMR also recommended the Financial Services Compensation Scheme (FSCS) explore risk-based levies as its funding method. The FCA has since received feedback on its December 2016 consultation and aims to publish final rules in a 2017 policy statement.
It was also suggested the FCA review how FSCS funding impacts professional indemnity (PI) insurance. In the December paper the regulator posed questions about the impact and effectiveness of PI cover. The report said the FCA will consider the responses and, depending on the outcome, may consult on draft rules.
9. FOS and long-term products
FAMR recommended the FCA should introduce a long-term product limitation period for referring complaints to the Financial Ombudsman Service (FOS). The regulator and the Treasury said they would review ongoing trends around complaints on long-term products in 2019, as part of the FAMR data review.
10. Benchmarking FAMR
It was recommended the regulator produce indicators to monitor the development of the advice market as recommendations are implemented, which would be then tracked on an annual basis.
The benchmark indicators are expected to be published on the FCA's website in Q2 2017.
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