The final report provided 28 recommendations designed to:
- Provide affordable advice to consumers;
- Increase the access to advice; and
- Address industry concerns relating to future liabilities and redress, without watering down levels of consumer protection.
Changing definition of financial advice
One aspect of the review looked at how financial advice and guidance is provided and how easily consumers can access it to help them make decisions about their finances. The review found an advice gap for consumers who either have smaller amounts to invest or want specific advice about retirement. Specifically, the review suggested these consumers would benefit from a high quality, specialised and detailed guidance but found firms are reluctant to offer this service because of uncertainty about the boundary between providing helpful guidance and making a personal recommendation. The uncertainty stems from two separate definitions of advice in the UK:
- The description of a personal recommendation in MiFID; and
- The more broader definition of advice in the Regulated Activities Order (RAO).
HMT published their policy statement in February 2017 confirming they will change the definition of financial advice for regulated firms. This means that regulated firms will only be giving advice when they provide a personal recommendation. So they can offer the detailed guidance, recommended in the FAMR report, and not require authorisation for that activity. However, if they are only authorised to give advice on investments they will need to remain authorised, even if they do not intend to make personal recommendations.
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There are no changes to the wider RAO definition of advising on investments for unregulated firms meaning these firms will not be able to provide the FAMR recommended guidance services to consumers. The changes will be implemented on 3 January 2018 to align with MiFID II and the FCA have consulted on the relevant rule changes in CP17/28.
Further FCA proposals
The FCA is working on a series of further proposals on the measures it will take to address the recommendations set out in the FMAR Report:
August 2017: Consultation Paper 17/28 covering:
- proposals for Handbook changes arising from the changes to the advice definition;
- guidance on personal recommendations;
- guidance on experiences arising from the FCA’s Advice Unit; and
- guidance on the treatment of insistent clients.
A policy statement is expected in Q4 2017.
April 2017: Guidance Consultation 17/4 covering four of the FMAR recommendations in relation to:
- how firms can offer streamlined advice on a limited range of consumer needs;
- the standard types of information required for the fact finding process and what to consider when verifying a third party fact find;
- how firms can help consumers make their own investment decisions without a personal recommendation; and
- explaining what employers and trustees can provide on financial matters without being subject to regulation.
Final guidance is expected in Q4 2017 and will incorporate existing guidance in FG12/10 and FG15/1.