We’ve already taken a light touch (ahem) look at the FAMR report overall but, in among all the consultations and not consultations and the stuff that is actually going to happen but will take time and the fact that aspects might get upended by MiFID II at some point over the next 18 months, lies one key question.
Has, or rather might, FAMR achieve what it set out to do? Because if we strip all the other stuff away, it comes down to one simple aim: “affordable and accessible financial advice and guidance for everyone, at all stages of their lives?” It pops up at various points in the FAMR report. It’s even in italics, so we know it’s important.
There are some good bits in the recommendations. If they are put into action then consumers will hopefully benefit. Albeit not for a while. There is no such thing as a quick hit in financial services regulation and the only thing that looks likely to actually happen in the immediate future is kicking off the Financial Advice Working Group. Or FAWG.
There are potential benefits to be had from the development of a clearer regulatory framework around streamlined advice *coughrobocough* but also huge potential for it all to go a bit bankered. Which we can’t help but suspect is the more likely option. Cynics that we are.
Improved suitability reports are a positive; anything that makes the process clearer to the client is good. But this won’t drive people to advice who would not otherwise have been there anyway.
The key to much of this is “at all stages of their lives”. Retirement itself might have hogged the spotlight over the last couple of years but the industry has been determinedly banging the drum that retirement saving (kind of like a puppy but nothing like as cute or cuddly) is for life. And where do people spend most of their life? Bingo! at work. That place with free wi-fi that isn’t Starbucks. Throw in auto-enrolment and it’s the closest to a guaranteed point of contact as you’re going to get. But, employers have been here before and any previous appetite for supporting employees with financial guidance was quashed by a combination of reprisal avoidance and suddenly wondering why they would absorb a significant cost for something that probably won’t make anyone like them anyway. The proposed fact sheet on spot the regulation line and top ten tips for supporting employee financial health may well help with this but only where there is still an appetite from the employer. There may be a few popping up looking enthusiastic like crocuses in a field of snowy mud but the costs and admin pressures of auto-enrolment are weighing heavily on many. Of course, there needs to be an appetite from the individual too.
And therein lies the rub. Does everyone really want financial advice? We want them to. As an industry, we’re always pushing the benefits of advice (I decline to use the V word) as we know the good it can do (not to mention the long-term damage that can be inflicted by poor decisions). But, many are just as resolute that they need no such thing. Some of these will be correct and some won’t. Such is the way of the world.
The focus on technology and streamlined solutions apart from apparently being more economical appears to be aimed at the younger end of the market. Having carried out extensive research with the lang cat’s millennial segment (Hey Lucy!) we can confirm that, not surprisingly, the generation that has grown up with Dr Google as a secondary care-giver is pretty happy to carry out their own research and confident to make decisions on the back of it. We’re talking about an ISA, possibly pension fund decisions. Other more complex stuff will follow and at that point the picture may well change. They may also be a more attractive prospect for an adviser by then too. So that all works out in time.
Will FAMR ensure “affordable and accessible financial advice and guidance for everyone, at all stages of their lives?” We’ll have to wait and see. It might improve the situation for those who are already engaged with the idea but I’m still to be sold on how it will open advice up to everyone.