The Personal Finance Society has said that the Financial Advice Market Review announced by the Treasury is a unique opportunity for the advice profession to influence the next phase of evolutionary change required to better meet the public’s financial planning needs.
PFS chief executive, Keith Richards, wrote to the chancellor in early July to request a government-backed review in the wake of member reaction to the significant hikes in regulatory levies and the inevitable impact this has on both the sector and consumers alike.
He subsequently met with economic secretary to the Treasury Harriett Baldwin, ahead of the recent announcement, after which he reported to members that the government was committed to reducing the negative impact of regulation more broadly.
He went on to state that the review will enable the advice sector to exert an influence, if they approach it in a balanced and professional manner.
Richards said: “As the review is government initiated, it represents a genuine opportunity for advisers to help shape the changes for the good of the public and profession alike.
“It is a clear indication the government recognises that the current cost and unlimited liability is impacting on all models of regulated advice and restricting the innovation of low cost entry solutions.
“There is also clear understanding within the Treasury that spiraling regulatory costs are making it difficult for many existing firms to stay in business which, in turn, affects members of the public already under advice and will reduce capacity even further. It also acts as a deterrent to those contemplating entering the market.
“Motivated by pension freedoms and public need, it will give the government a timely and much-needed opportunity to address the capacity and access issues created by the new pensions flexibility, which is leading to complaints from frustrated consumers who are unable to obtain advice for various reasons.”
In calling for government investigation into the impact of regulatory cost and risk, including how future levies should be collected, Richards argued that the increasing and unsustainable regulatory burden is neither balanced, nor in the best interests of either the public or the industry that serves them.
He said: “The knock-on effect this has on consumers and their ability to access professional advice is an area of increasing concern. Whilst regulation is in place to protect the public from poor outcomes, in its present form it can ironically restrict access to good outcomes and increase cost.
“A more balanced approach is essential, coupled with reasoned, realistic solutions from the sector for all regulated advice, not just low-cost simplified.”
The PFS has also requested a broad review of regulatory funding, suggesting that it is time to address an outdated mechanism that levies unfairly against a smaller number of contributors in the post-RDR landscape.
“The current system is very opaque from a consumer perspective, with regulation, FSCS, MAS and Pension Wise all appearing to be free,” said Richards. “We hope the review will give the public the transparency they deserve – consistent with RDR principles – rather than costs being bundled into adviser charging structures and making advice look disproportionately expensive.
“People without significant wealth must have the opportunity to benefit from professional financial advice. Any regulatory and legislative barriers that restrict availability and affordability must be removed and replaced with a solution for all regulated models.”
The Personal Finance Society is encouraging advisers to forward their feedback and to input directly to the consultation process as soon as a link becomes available. It has also suggested that advisers should lobby the support of their MPs to ensure they understand the issues and impact on constituents.