Evaluation of the impact of the Retail Distribution Review and the Financial Advice Market Review

Download the RDR/ FAMR 2020 evaluation (PDF)[1]

Please see Annex 1[2] for a summary of data relevant to the FAMR Baseline and RDR outcome indicators, and Annex 2[3] for more information on our project methodology. Please also see the Ignition House consumer research report[4] that has been published alongside our report.

Background

The RDR was launched by our predecessor, the Financial Services Authority (FSA), with most of the rules it introduced taking effect at the end of 2012. 

FAMR was launched jointly with HM Treasury in 2015 and built on the work of the RDR. 

Both were significant milestones which sought to improve standards in the distribution of retail financial services products. We committed to review their impact on the market for support for consumers seeking to invest, and to test whether they delivered their desired outcomes.

In May 2019, we published a Call for Input[5], outlining the intended scope of the RDR and FAMR review (which received 57 responses). To supplement the Call for Input, we held a series of stakeholder events across the UK to gather further feedback, and meet with trade bodies, firms and other interested parties.

Through 2019 and 2020, we conducted new research to establish an up-to-date evidence base. This includes qualitative and quantitative research with consumers, data collection from a representative sample of firms operating in the market, and looking at some international markets, to see what lessons can be learned. 

Key findings

We found that, overall, the financial advice market is improving, albeit slowly. However, we also found that many consumers are holding their money in cash rather than investing it, so are missing out on the potential opportunity to make their money work better for them in the longer term. 

Many consumers do not seek, or receive, the sort of help with their finances that would equip them to make better investment decisions. Although there has been some innovation in the market, in particular around the development of automated advice, there is more scope for further development and innovation of models and services that could serve more consumers at different stages of their lives. 

We think more can be done to provide support to mass market consumers, to help them engage with their finances and make better investment decisions. This could include more tailored guidance services, and simpler advice services. 

We understand that the current regulatory framework may pose challenges to further market development in sufficiently meeting these consumer needs, and recognise our role in making sure the regulatory issues noted in this report are explored and addressed, where possible.

Next steps

We want to see a market that offers a broader range of consumer support services so people can find the right support for their needs that gives them the confidence to invest. 

We will supplement the evidence from this review with feedback to our Call for Input[6] on Consumer Investments to inform our next steps to tackle some of the regulatory challenges. We expect to carry out this work during the first half of 2021, and will provide a further update at that point.