Removing the ambiguity here would be relatively simple and would make a difference.
Next up is the targeted support proposal, which would allow firms to communicate to everyone in a target market with helpful ‘people like you’ messages: ‘You might want to top up your Isa’; ‘You might want to top up your pension’. ‘Just retired and sitting in cash? You might want to think longer term.’
This has the potential to be extremely powerful in the hands of advice firms that have embraced target markets in their approach to consumer duty.
The final proposal – simplified advice – would enable firms to make recommendations in certain cases based on a limited fact-find. Again, this is a good thing.
Regulatory requirements should be proportional to both potential benefit and potential harm, so anything that would enable a firm to make a recommendation on an Isa, for example, without undertaking a full holistic review could make a big difference.
Importantly, the three proposals are grounded in the work that’s been done over the past two decades – and, as such, they reflect advice firm realities and genuine consumer needs.
As the regulator notes, one trend that has emerged in recent years as a result of efforts to fill the gap is the growth of robo-advisers, but these have not been able to crack the customer acquisition challenge. Why not? Because robo-advice is not advice at all, but robo-product sales – and clients can see that.
What the majority of people want is to know what’s right for them and what they should do as a result.
The regulator’s proposals have the potential to provide a more proportional approach to this challenge: full advice for people that value it and need it, and guidance for those who want good generic information – with the regulated industry empowered to provide that guidance.
And, in the middle, the ability to provide targeted support to groups of clients, enabled by the huge strides in technology that make it easier for firms to segment clients digitally and communicate digitally.
In 2022, 4.4mn people received advice – just 8 per cent of the adult population. The key to increasing that is to boost the productivity of advisers, giving them the time back to be able to serve more clients.
Now, the problem could be addressed from two directions at once, with technology reducing the time to serve as regulation empowers firms to meet client needs in new ways.
The established industry could soon bring quality advice to a much wider range of people, narrowing the advice gap in the firm and in the nation.
