I’d like to talk about the FCA’s vision for the consumer investments sector, and the role of policy in helping to shape that vision.

Part of our vision for a well-functioning sector involves making sure there is accessible support for consumers.

Over the years, there has been a lot of focus on the role of holistic advice, and I clearly don’t need to remind you about the reforms introduced by the RDR at the end of 2012. The goal of RDR was to drive up the standards of advice, and we believe the sector has responded well.

This was clear when we carried out our Assessing Suitability review in 2017, where we found that over 93% of pension investment advice was clearly suitable. However, we are aware that many consumers who may need support are not currently receiving it, and there’s a variety of reasons for that.

Some are unwilling to pay the cost of advice or perhaps don’t see the value of it. Others may want to receive advice, but maybe can’t afford it, and others may need support to make investments but are unsure where to get that support.

Our landmark reforms on advice and guidance

That is why we launched the advice guidance boundary review alongside the Treasury last year.

We want to ensure that consumers get the help they want at a time they need it, at a cost that is affordable. This is to help them make informed financial decisions.

Any new regulatory regime must also provide consumers with appropriate levels of protection, as well as being commercially appealing to firms who want to deliver it.

We have an intentionally bold target, and we anticipate the review will deliver a landmark set of reforms. To be clear, the purpose of this review is not to undermine or fundamentally change holistic advice. It is to expand the supply of support to consumers who need it. We envisage any reforms we introduce would be complementary to holistic advice, and will enable a diversity of supply to flourish.

We published a policy paper at the end of last year and that paper sets out our early stage thinking. It includes putting forward three proposals to expand that diversity of supply to consumers.

It’s worth noting it’s an early stage paper. That means none of our proposals at the moment are set in stone. It’s our initial thinking, and we really want the paper to prompt discussion. We welcome any other ideas you have that you think we may have missed or not fully explored, as that will help us develop our thinking further.

1. Clarity on the advice guidance boundary

The first proposal is perhaps the simplest. Before we start coming up with ideas for new regimes, we want to ensure the existing framework works as effectively as possible.

We know we need to create new avenues for firms to provide mass market consumers with support. However, we understand firms are cautious about delivering guidance services too close to the boundary.

We are often told this is due to fear they might unintentionally move into delivering regulated advice. This caution leaves a gap of potential guidance-based support. So the central tenet of our first proposal is to try and narrow that gap.

Last August we published a document to give the industry more certainty on what it can do without crossing that boundary. We want to hear from you.

If there are more scenarios where you feel constrained from supporting consumers and would value clarity from the regulator, we need this industry input to take forward these proposals, as any guidance or further insight from the regulator would be based on real world examples.

There are some options available to us here. We could provide new guidance, or we could perhaps simplify existing guidance to explain what support firms can offer.

Any work would be underpinned by the Consumer Duty, particularly the requirement on firms to avoid causing foreseeable harm to consumers.

For example, we have previously highlighted how firms can, under the Duty, outline the unintended adverse consequence for a consumer withdrawing funds from their pension too early. Firms could also warn of the potential risks of stopping or reducing pension contributions.

Our proposals would expand on where we expect firms to comply with the Consumer Duty, and where they can do so in a way that doesn’t amount to giving a personal recommendation.

2. Targeted support

This is a proposal for a new type of support, and is perhaps the most exciting and genuinely innovative of our three proposals.

We are proposing the premise of ‘better not best’ when it comes to targeted support, and the essence is to provide consumers with suggestions to get them to better outcomes in managing their money.

We recognise that targeted support would not be as bespoke as simplified or holistic advice. But in taking forward the thinking on what targeted support could look like, we’re considering a number of policy issues:

• Scope of the service. We have an ambition that targeted support would provide support which is widely accessible to mass market consumers across their investment and pension decisions, including at retirement.
• A new standard. Instead of a personal recommendation ‘based on you’, we’re exploring targeted support being a suggestion ‘based on people like you’, which would allow firms to base support on more limited information about the customer.
• Fees and charges. We’re exploring options which enable targeted support to be offered without explicit upfront charges, although the cost of any service would need to remain transparent throughout the consumer journey.
• Consumer protection. We are working through what robust protections will need to be in place to protect consumers to ensure good outcomes. This includes how firms will need to communicate so consumers understand the services they are signing up to. It will be critical for consumers to understand what targeted support is and importantly, what it is not.
• The regulatory framework. We’re considering which mechanisms, including potential legislation, need to underpin any new regime. That regime would need to work for us as the regulator, for consumers and for firms as well.

3. Simplified advice

The concept here is of a more streamlined, more straightforward advice service.

The aim would be to meet the more basic needs of mass market consumers. We envisage that it would be transactional one-off advice, specific to a point in time and a specific client need.

The initial thoughts we have for this regime are that it would exclude advice on decumulation. Currently, when giving this advice, a firm needs to know quite a lot about a customer’s financial and personal circumstances. So we think there are challenges in simplifying this in a way that is practical and results in a personal recommendation.

Outside of decumulation, you’ll be aware we have separate ongoing work reviewing how firms are delivering retirement income advice, and we’ll be publishing our findings on that later this quarter.

We propose that simplified advice would not include ongoing advice or a periodic review service, and it would be delivered by advisers with proportionately fewer qualifications, given the narrower, simpler scope.

We are aware, of course, that this is not the first time we’ve considered simplified advice, which to date has not been widely adopted. However this time, post-Brexit, we have more freedom to design a regime that works for UK consumers and firms.

It is our intention at the FCA to make the best use of this opportunity. We also recognise that the propositions offered by firms and demand for by consumers may continue to evolve. So by providing targeted support, it may lead to a greater market for simplified advice emerging over time.

There’s an opportunity for you to help us shape how the sector develops going forward. So please do respond to our open consultations – we really do listen and want to hear from you. Your thoughts are critical in helping us shape our policy proposals and making them a success.

Finally, I really believe there is a huge opportunity here for you and your firms to demonstrate the value you provide to your clients and to consumers.