The Financial Conduct Authority (FCA) has launched a consultation on three proposals to reform the advice/guidance boundary, including plans for a new form of simplified advice.

Plans for the advice/guidance boundary review were first announced as part of the Edinburgh reforms in 2022, with the FCA having also shared early findings from its review of the advice/guidance boundary earlier this year.

The consultation builds on this work, outlining three proposals designed to ensure that more savers can access advice or support to help make their money work harder, and help more people benefit from investment opportunities, provide for later life, and save for major expenses.

In particular, the consultation outlined plans to clarify when firms can give consumers support without giving regulated financial advice, alongside an innovative new approach allowing firms to provide support tailored to groups of people in similar circumstances.

The FCA's consultation also included plans for a new form of simplified advice that aims to make it easier for firms to provide affordable personal recommendations to clients with more straightforward needs and smaller sums to invest.

All three of the proposals aim to examine how innovation could expand the market to new forms of advice and support, driving competition to better serve consumers, while maintaining consumer protections.

This comes after previous research from the FCA found that only 8 per cent of UK consumers received full financial advice in 2022, with the regulator warning that some savers may struggle to make the right choice for them without help.

Commenting on the proposals, Economic Secretary to the Treasury, Bim Afolami, said: “The gap between holistic financial advice that is unaffordable for many, and guidance that is free to access but not personal to the consumer, is simply too vast.

“This so-called ‘advice gap’ is excluding people with modest investments, who are looking for support that doesn’t break the bank.

“This just isn’t good enough – we have long needed a middle ground that is affordable and accessible. The policy paper that the government and the FCA have published today will explore how we can achieve exactly that.”

FCA executive director of markets and international, Sarah Pritchard, added: “We want to open the door for more people to get the right advice or support to manage their money at the time they need it and at a cost they can afford. We’ve already helped firms test drive innovative solutions but we want to go further.

“This review will help us produce new rules to deliver this important step change for industry and consumers. It’s important we get this right and we welcome feedback on whether the proposals are right for consumers and for businesses.”

News of the consultation has also been welcomed in the industry, with Royal London director of policy, Jamie Jenkins, highlighting the proposals as a "step-change" in trying to tackle the advice gap.

"For those who receive professional advice, the benefits are clear, but the journey to that point is built around a framework that is so risk averse that very few people are receiving any meaningful guidance along the way," he continued. "This is a welcome intervention to attempt to change that.”

Adding to this, Pensions and Lifetime Savings Association deputy director for policy, Joe Dabrowski, said that it was especially welcome to see pension scheme trustees specifically considered, suggesting that "the more clarity they are afforded with the support they can offer their members, the more tailored and appropriate guidance will be".

"Improving the framework through which savers have access to different forms of advice and guidance is a top priority, especially as complexity around individuals' financial decision making increases," he continued.

"As the review recognises, savers often struggle to make complex financial choices. The role of trustees and employers, who can support and help them navigate these choices in their best interests, throughout their working life and at retirement, is essential.

“People struggle to engage with their pension for a range of reasons from complexity to behavioural biases, short-termism and a lack of confidence. Having the right guidance in place will play a vital part in addressing these issues. We look forward to collaborating further and providing a detailed response to this review for the benefit of the saver.”

Nucleus technical services director, Andrew Tully, added: “We are big supporters of advice and know just how much it can help people achieve good outcomes.

"The proposals from the FCA and government could encourage millions more to save for their future and as their needs become more complex create further opportunities for advisers."

PIMFA head of public affairs, Simon Harrington, also agreed that the proposals will go some way to closing the UK’s support gap – ensuring that people are able to access targeted financial advice which is relevant to their needs.

"It is vital that firms feel empowered to provide support without the concern of being seen to provide financial advice and we are hopeful that this will manifest itself in a manner that consumers derive value and meaning from being told what people like them would do in similar circumstances," he continued.

“In order for these proposals to be successful, it is vital that they are both commercially viable for firms as well as ensuring that consumers are guided towards good outcomes for them, rather than the firm guiding them.

"We will continue to work closely with both parties on this review in the spirit of the welcome practitioner led approach that the review has been conducted in up to this point.”

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