Altus Consulting, a leading specialist Financial Services Management Consultancy has today released a whitepaper The land that RDR forgot: regenerating mass-market investing that examines the FCA proposals on the so-called ‘advice boundary’. The report is supported by research based on polling of 32 leading UK financial institutions [and will be launched at an event in Canary Wharf, Advice Guidance Boundary Review: Solving the Investments Crisis on Tuesday 21st May, 2024]
Background to the advice boundary proposals
Last year the FCA and the Government set out three proposals for reforming the advice boundary, including clarifying the advice guidance boundary, a simplified advice option, and a targeted support regime. At Altus Consulting we strongly support the concept of targeted support as a way of bridging the ‘advice’ gap.
In our whitepaper : The land that RDR forgot: regenerating mass-market investing released today we argue that while Targeted Support isn’t perfect, if the regulatory framework gets it right, it may be good enough.
As Martyn Evans, CEO at Altus Consulting, says: “At the very least, the proposal has the potential to be one of the boldest attempts to move the regulatory environment more in the direction of meeting customers where they are, rather than where we expect them to be. Crucially, Targeted Support would put the industry back on a more proactive engagement footing. If funded through cross-subsidisation, it will overcome the price and value barrier to adopting advice.”
What is Targeted Support?
Targeted Support proposes support for consumers on the premise of a recommendation based on ‘people like you’, enabling a return to a more proactive matching of the available product set to the likely customer need.
As Robert Holford, Head of Research & Regulation for Altus Consulting explains: “While the objective may be focused on improving consumer outcomes, it does not hurt that there is a potentially lucrative opportunity for providers of investment services in unlocking access to the currently underserved, mass-market; not to mention considerable client retention benefits for incumbents that can ‘get this right’. Targeted Support, is the standout proposal that has a chance of impacting the ‘advice’ gap.”
Nobody’s perfect
Our whitepaper includes polling data carried out from March to April 2024, into the industry’s reaction to the Advice Guidance Boundary Review (AGBR) proposals across 32 life companies, advisors & wealth managers, platforms & technology providers, and banks & personal savings providers.
As Robert says of the results: “Like Altus these companies had a high level of interest in the current proposals, with over 65% saying they would actively consider offering Targeted Support. Overall Life Companies have the strongest levels of interest in Targeted Support.”
He adds: “However, those surveyed said that simplified advice is most likely to meet the decumulation ‘gap’ needs while Targeted Support was still seen as important in a decumulation setting although overall respondents were more comfortable with its use in accumulation.”
Support across the spectrum via a hybrid approach
The feedback from those surveyed highlighted that Targeted Support would have a broad application across the wealth spectrum with a significant minority of those polled seeing a role for Targeted Support above the £250k ‘advice boundary’, while simplified advice was seen as largely targeted below this level.
It was clear from the research that a hybrid approach will be key to delivery. Simplified advice requires a human component, but a clear majority of respondents felt hybrid was key to Targeted Support delivery.
For everyone and as easily as possible
Another distinct message from our research was that services need to work for both new and existing customers. A significant majority of respondents felt that Targeted Support should be applied broadly across both new and existing clients – not just existing clients.
Companies were also clear that the focus for providers should be on ensuring the delivery of Targeted Support should be as ‘frictionless’ as possible by keeping disclosure to a minimum, avoiding affordability checks unless absolutely necessary and using non-explicit charging.
Just the beginning and a long way to go
Despite expressing strong support for the FCA’s innovative approach most respondents felt there was still a long way to go on closing the ‘advice’ gap.
Robert agrees commenting: “This feels like just the beginning. The FCA’s proposals offer a path forward, but building out this ecosystem will require more than just these initial regulatory changes – it demands a sustained, collaborative effort on the part of the government, regulators, and the industry to promote the benefits of long-term investing and not just highlight its risks.”
The whitepaper can be downloaded here.
