Notwithstanding the RDR reforms, the FAMR noted several major challenges for the UK's financial advice industry.
185) The following sections examine the 2017 responses of the FAWG in relation to the key regulatory challenges identified in the 2016 FAMR report.
The FAMR Report noted a widely-held consensus that the 'basic advice' regime, which as IC explained, allows firms to focus on specific needs of clients without the need to undertake a comprehensive overview of their overall financial circumstances, had not been widely utilised by financial advisors.
Another issue of concern identified by the FAMR was the lack of regulatory and industry consensus about financial 'rules of thumb' (for example, that consumers can afford to take more financial risk at young ages, and less at old ages), and 'nudges' (that is, prompts for consumers to evaluate their financial circumstances--such as 'when starting a family, consider whether you could cope financially if your income stopped because of illness or accident, or whether you could benefit from taking out income protection').
The FAMR also made several recommendations for the FCA to develop comprehensive regulatory guidance (with illustrative examples) to assist firms in providing advice which could be 'streamlined' towards addressing specific aspects of their financial needs.
Whilst acknowledging the increased use of automated advice tools as a means of enabling consumers to access affordable, high quality advice, the FAMR also noted the scope for the FCA to formulate best practice guidance to assist firms in testing and evaluating these tools.
It has stated that FAMR builds on improvements made to the financial advice industry brought about by the Retail Distribution Review (RDR) which raised the standards of professionalism across the financial advice market.
It has stated that the recommendations from the FAMR review will help to address current concerns about the affordability and accessibility of financial advice and guidance, particularly regarding the 'advice gap'.