Feedback: Advice Guidance Boundary Review

Advice Guidance Boundary Review – proposals for closing the advice gap

Many people struggle to make important financial decisions and many find engaging with decisions about their retirement finances difficult. Some keep too much of their savings in cash, losing out on potential returns. Others do not regularly review their investments or invest in products that don’t meet their risk appetite.

People are not getting the advice and support that they need. Data from the FCA’s Financial Lives survey found that only 8% of adults reported taking financial advice over the previous year – just 4.4 million consumers in 2022.

Our initial proposals

The Government and the FCA jointly published a Policy Paper (DP23/5)[2], on the Advice Guidance Boundary Review (the Review) that set out our early thinking to enable consumers to get the help they want, at a time they need it, at prices they can afford.  

We included 3 proposals:  

• Targeted support – a new form of support allowing authorised firms to provide suggestions that are appropriate to consumers with the same high-level characteristics.
• Simplified advice – a new form of advice that makes it easier for firms to provide affordable personal recommendations to consumers with more straightforward needs and smaller sums to invest.
• Further clarifying the boundary – providing greater certainty for authorised firms on scenarios where they can provide support that does not constitute regulated advice.

We received 106 written responses to DP23/5 and feedback as part of our engagement from regulated firms, industry representatives, consumer bodies and our statutory panels.  

We are grateful to all stakeholders who offered their views which are shaping our policy development.

Feedback we received

Most respondents agreed that our proposals are a positive step towards improving consumer outcomes and agreed with the proposals outlined in the paper.  

The Financial Services Consumer Panel challenged us to realise the full ambition of this review and encouraged us to keep an open mind on what may be needed to achieve the strategic aims of the review – which are to help consumers access the support they need to make informed decisions.  

There was concern too about the risks of developing new forms of regulated help, including the need to ensure people fully understood the support they were being offered and what protections would be provided.  

Targeted support

A majority of respondents indicated that targeted support offered the best way of helping consumers at scale.  

Stakeholders pointed out that targeted support would only be successful if consumers have confidence in it and if they understand what it is, and what protections it provides.  

There would be risks not only to consumers if this service is not delivered well but also to the success or viability of targeted support as a new regulatory offering.  

We received feedback focused on the scope of the regime, and the importance of delivering good outcomes for all savers and investors, including those who have characteristics of vulnerability. Some respondents emphasised the need for a joined-up approach with the wider regulatory family, the importance of the Consumer Duty to support implementation of any proposals with debate on the merits of detailed rules or an outcome-based regime. Others discussed the role of technology, including open banking, to support the proposals.  

Simplified advice

Respondents also saw a role for simplified advice but recognised that it may not meet the demands of the mass market.  

Some respondents suggested that simplified advice was needed in conjunction with targeted support for those who cannot afford, or do not want, holistic advice but need additional help.

We have also heard feedback that targeted support could help with directing consumers to further sources of support including holistic advice.

Further clarifying the boundary

There was interest shown towards the proposal for the FCA to further clarify the boundary between regulated financial advice and unregulated guidance but recognition that on its own it is unlikely to resolve the support gap. However, some respondents indicated that they would welcome more examples of support they can give without undertaking financial advice.

The FCA’s approach

Automatic enrolment has significantly increased membership of defined contribution (DC) pensions. Many engage with their pensions for the first time as they approach retirement. With DC pensions a growing source of retirement income (the total number of DC pension plans held by FCA-authorised firms accessed for the first time in 2023/24 increased by 19.7% to 885,455 compared to 2022/23 (739,652)) these decisions and the support people receive in making them will be crucial. There is a particular need for support in relation to pensions.

As a result, the FCA’s first consultation, in December 2024, will focus on pensions support. We will set out how we envisage targeted support, including research on consumer interest, working for pension savers.  

We have already published findings from our pensions engagement field trials[3].

Many of the challenges people face in making pensions and retail investment decisions are common. There are, however, distinct challenges faced when making decisions about retirement finances.  

By the end of H1 2025, we plan to:

• develop related proposals for targeted support in relation to wider investments  
• consult on the draft FCA rules that will apply across consumer investment and pensions

We are conducting consumer research into retail investments now. This will include, but is not limited to:

• quantitative research to develop our understanding of the decisions retail investors make, the support they are receiving, the harms in the market and how these could be addressed.
• qualitative research to further understand the barriers to investors, and potential investors, receiving support and how targeted support may help overcome them.

We will work closely with the Financial Services Consumer Panel and other consumer representatives to develop our proposals, including seeking views on how to mitigate any potential risks of harm. We will keep an open mind to test whether targeted support and simplified advice will achieve the aims of this work – which are that consumers have access to the help they want, at a time they need it and at a cost that is affordable so they can make informed decisions.

We will continue to work with the Information Commissioner’s Office and The Pensions Regulator on the application of the Privacy and Electronic Communications Regulations (PECR) 2003 including how these interact with proposals being considered as part of the Review, including targeted support. 

On 15 November 2024, we published a statement[1] to give firms greater clarity about communications they can make under the Consumer Duty that are compatible with PECR.

How we will work with firms

We will continue our engagement with firms and through our other statutory panels, industry working group and trade bodies.  

We want firms to consider how they can better support their customers, and we want to collaborate with them to test options. We are working with our innovation function to support a more dynamic approach to policy.  

In the meantime, interested firms can contact us at [email protected] and test propositions in our digital sandboxes.

Over 85% of investment adviser firms employ 1 to 5 advisers. We will engage directly with small advice firms in 2025, through a series of roundtables around the country. We will use this and other engagement to gauge the willingness and capacity of these firms to offer a simplified advice service.  

We will use the feedback to these consultations to finalise our proposals. There are different possible routes to delivering a targeted support regime, including through legislative change. The Government and the FCA will keep these options under review as the proposals for this regime develop.

Timeline and next steps

Wider context

We are committed to playing our role to support growth and competitiveness. Ensuring consumers can make informed investment decisions is an important part of ensuring healthy capital markets which deliver growth. As part of this, the Government and FCA are committed to replacing EU-inherited consumer disclosure regulation with a new framework tailored to UK markets and firms.

The FCA will soon consult on a new product information framework for Consumer Composite Investments (CCIs) that will replace the:

• EU-inherited Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation
• Undertakings for Collective Investment in Transferable Securities (UCITS) disclosure requirements

The new CCI regime will deliver more tailored and flexible rules which will address concerns across industry with current disclosure requirements. It is designed to give consumers the information that they need when making investment decisions and will complement our proposals on the advice guidance boundary review in supporting consumers to make important financial decisions.

The new retail disclosure regime is expected to be in place in H1 2025, subject to our consultation process. The FCA intends to consult on proposed rules for the CCI regime in 2024.

Through these cumulative measures, we have an opportunity to reform the consumer journey and improve consumer outcomes.