CP22/24: FCA consultation on broadening access to financial advice

By Liam Edwards and Alex Gillespie

The FCA has published a consultation paper (CP22/24) proposing a new core investment advice regime. This consultation sets out the FCA’s proposals to increase consumer access to advice in relation to mainstream financial products and consequently bolster confidence in the consumer investment market.

According to the FCA’s Financial Lives Survey 2022, approximately 4.2 million consumers hold at least £10,000 in savings, despite possessing a risk appetite that would justify investment of cash savings.

As such, the purpose of the proposed investment advice regime is to provide mass-market consumers with straightforward financial needs greater access to simplified advice on investing into mainstream products (specifically within stocks and shares ISAs). 

The FCA has identified both supply- and demand-side issues with the current advice regime, including:

• on the supply side, concerns on how best to interpret the existing flexibility within current suitability rules (noting prospective mis-selling liabilities if advice given is not suitable) as well as the economic viability of providing advice to mass-market consumers; and
• on the demand side, less wealthy consumers don't tend to access professional support with their finances as often as wealthy consumers despite many wanting more support to make financial decisions.

The FCA has made various recommendations to increase firms' confidence and commercial willingness to provide financial advice proportionate to the needs of consumers. The recommendations include:

• proportionately reducing the existing qualification requirements to reflect the lower risk of the narrower scope of this advice, which is focused on only the necessary technical and regulatory understanding to advise on mainstream investments;
• reframing the existing suitability requirements to reflect the narrower scope and complexity of this advice relevant to the decision that consumers will be making;
• limiting the possible investments advisers can recommend under the new regime to a set of mainstream investments by excluding any recommendations to invest in high-risk investments; and
• allowing greater flexibility in charging structures to allow consumers to pay for transactional advice in instalments. 

The FCA hopes that, by reducing cost and increasing accessibility, the advice gap identified in its 2022 Financial Lives Survey can be narrowed.

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