FCA and HMRC launch financial advice review
'The reality is that many people cannot afford to pay for good quality independent financial advice'
The Financial Conduct Authority (FCA) and HMRC have launched a joint initiative with the aim of improving consumers' access to financial advice.
The 'Financial Advice Market Review' will seek to remove the so-called 'advice gap' by examining the barriers that may be causing firms and advisers to be overly cautious, will look at how to provide regulatory clarity and remove barriers which may be putting consumers off from seeking advice.
It follows on from the introduction of pension freedoms in April 2015, which has exposed a lack of affordable advice in the market as many consumers remain confused as to what they can now do with their savings.
Patrick Connolly, a certified financial planner at Chase de Vere, believes that the review is desperately needed.
He commented: 'We welcome this initiative and hope that it can help to address the huge advice gap which so clearly exists in the UK.
'The reality is that many people cannot afford to pay for good quality independent financial advice and as a result, risk making the wrong financial decisions which could in turn affect their and their family's standard of living in the future.'
The review has a wide scope and will look into the availability of advice in areas such as investments, savings, pensions, and retirement income products (including annuities), mortgages (including Help to Buy and equity release) and general insurance.
Connolly believes that the best way to ensure consumers receive reliable and impartial advice is through their employers.
'While impartial organisations such as the Money Advice Service and Pension Wise provide valuable information, their services are quite limited and so instead many people end up taking 'guidance' from organisations which are primarily concerned with selling products to them,' he said.
Settle the waters
Meanwhile the government has launched an immediate consultation on the barriers stopping pension scheme holders from accessing their money.
One of the issues which has already been identified is the lack of consumer understanding on their new freedoms, what their new rights are and where they might suffer from penalties.
The rate of pension tax relief that high earners receive is also set to be cut from April 2016.
The managing director of Thomas Miller Investment, Matt Phillips, has said that endless consultations and changes will have a self-defeating effect, and what is needed is a grace period.
'Since the introduction of pension freedoms the government has continued to meddle and seems determined to carry on doing so. Having made them really attractive they are now merrily sending out different messages about pensions, which will only turn people off them once again', he said.
Phillips added: 'We need a period of stability and clear direction, not rumours and ambiguity. If advisers could be left to advise clients on saving more for their retirement, then we will all become a lot less likely to rely on the state in the future.'
Binyamin Ali is assistant editor of Private Client Adviser