The Financial Conduct Authority (FCA) plans to launch two consultations relating to the Advice/Guidance Boundary Review next year.

Speaking at a Future Strategy for Personal Finance Professionals event, FCA head of department, advisers, wealth and pensions, consumer investments, Nick Hulme, revealed that the first consultation paper will focus on pensions, while the second will focus on retail investments.

In the period prior to the consultations being published, the FCA urged advisers to engage with the review’s motives of clarifying the boundary, providing targeted support, and simplifying advice.

“Don’t wait for it to land before taking further steps to unleash opportunity and reduce that advice gap,” Hulme stated.

In the speech, which focused on the FCA’s new supervisory strategy for the financial advice sector, Hulme noted that the regulator’s thematic review had been completed, and it would be sharing further best practice in the first half of 2025.

He also highlighted FCA concerns that some firms may not be taking the costs of ongoing advice services into account, and the impact this then has on reducing returns and ability to realise client goals.

Furthermore, worries around some clients being charged for services not being delivered were also raised.

“This is important because 90 per cent of new clients are placed into such arrangements,” Hulme said.

“We also know how important ongoing advice is for the sector given it is 80 per cent of all advice revenue, up from 60 per cent in 2016.

“Put simply, where clients are placed into and paying for an ongoing service, we want to ensure they are receiving a good service in their interests. And if they are not, or an ongoing service isn’t appropriate firms should deal with this proactively.”

Touching on the Financial Services Compensation Scheme (FSCS) levy, Hulme noted that while it was reduced in 2023/24, significant liabilities still fall to the levy each year.

The FCA therefore expected to publish a policy statement by the end of this year for its capital deduction redress proposals.

It wanted to make sure that firms and their appointed representatives that create liabilities are better able to pay them and, should a firm fail, that there is more capital to go towards FSCS recoveries.

“As you can see, there are some building blocks that remain the same (continuing to be very assertive with bad actors, for one),” Hulme stated.

“However, against the challenging backdrop of some major changing fundamentals, which bring risk but also opportunity, there is also a lot of ’different’ happening.

“Through our concerted mindset shift on outcomes and pragmatism rather than prescription post the [consumer] duty, a willingness to take more risk and to experiment, to remove unnecessary burden through the call for input, to nurture more – through working on shared data needs and playing back best practice.

“By doing this, we can maximise our shared goals … so that, on one side clients of all wealth levels are able to make good investment decisions and do so empowered, understanding the risks and protection involved, whilst very much ensuring that a well-functioning financial advice sector is sustainable and supporting investment and growth.”

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