But it may also be an attempt to kick-start the stalling self-directed market.
The RDR has pushed many advisers to seek wealthier clients where they can be confident that their advice is needed and can be paid for.
It seems to me that some are banking on ‘robo’ to ride to the rescue for everyone else but the signs are that even here consumers will need some help. The real value that an adviser provides is knowing the consumer, their needs and their aspirations and being able to offer the full end-to-end service. So if advisers could be persuaded to expand their offering and provide guidance services where appropriate, that would be a good thing with more people getting help to do it themselves.
A ‘robo’ or a quango can never have the relationship that the consumer really needs.
The central element to this consultation is the attempt to shore up the definition of financial advice by adopting the EU’s MiFID definition. That says that a personal recommendation must be involved to qualify as advice.
It may reassure some advisers and of course we welcome any efforts that make the language of financial services clearer for the adviser and the end consumer. I am less convinced, however, that on its own it will make a meaningful difference to what actually happens in the market.
Unfortunately, there is little detail in the consultation, which is disappointing having waited for it for six months since the Financial Advice Market Review reported.
The question of who pays for guidance and how, must be answered and there is nothing in this consultation that gives clarity on this.
If an adviser were simply to guide a client through a range of options, that may not lead to a sale, who would pay the adviser? I see no evidence that the same people who are unwilling to pay for advice would be prepared to open their wallets for guidance.
If guidance is about stimulating the direct-to-consumer market, is a client who has decided to go self-directed likely to be prepared to pay for guidance?
That only leaves the product provider who cannot pay the adviser under RDR rules for advice, but may do so for guidance. But if no sale occurs as a result of the guidance is it not unlikely that the product provider will pay the adviser? This is a fundamental question that remains unanswered.
Then there is the issue of unauthorised firms setting up specifically to provide guidance, under lighter touch regulation than that covering adviser firms. We do see huge potential for rogue practices here so we propose a simpler solution.
Guidance services should be offered by product providers, and no one else. It would be clear to the consumer how the person providing the guidance is being paid and firms offering the service would be regulated. Consumers who prefer to save and invest themselves but need some help to get started, could find guidance without the costs that put them off.
