In a major review of the impact of RDR and FAMR by the FCA, in conjunction with Treasury, the watchdog found both number of people taking financial advice and the number of advisers has risen.
Key findings were:
- 8% (4.1m) UK adults received financial advice in 2019, an increase from 6% (3.1m) in 2017
- Adviser numbers are up from 35,000 in 2012 to 36,400 in 2019 (4% increase)
- The FCA’s Advice Unit has helped firms develop new automated advice models (it has received 137 applications for support, with 65 accepted)
- Estimated assets under automated advice services increased from £0.4bn in 2016 to £3.2bn in 2019
- Consumer awareness of automated advice has increased, with 19% of consumers having heard of these services (compared to 10% in 2017)
The study also found that while more consumers are getting support, further innovation could help more consumers improve their finances, says the FCA.
The RDR effectively moved the financial advice sector towards fees and away from commissions while FAMR was designed to make the UK’s financial advice market work better for consumers.
In its study of the long-term impact of RDR and FAMR the FCA found that many consumers were still holding money in cash that could be invested to provide potentially higher returns but have not sought or received help to enable them to make better investment decisions.
The FCA also found that the industry offers a range of services but there is “significant clustering around certain service types and price points.”
It wants to see more innovation in services to drive greater competition between firms across the market.
It aims to see more “tailored guidance services and simpler advice services” to encourage more consumers to get help.
The FCA accepted that some firms had raised concerns about understanding the point at which more general forms of consumer support become advice, suggesting limits to the ability to innovate.
Sheldon Mills, interim executive director of strategy and competition, said: “We want consumers to have access to high-quality advice and guidance at the right time in their lives, to give them the confidence to make better investment decisions.
“Our evaluation has found the advice and guidance market is moving in the right direction, but still has further to go. We will play our role to support the market to improve further, in the interest of more consumers. We will use the evidence base this evaluation has given us, along with the responses to our Call for Input on consumer investments, to shape our work to improve the market.”
The FCA says it will supplement the evidence from its review with feedback to its Call for Input on Consumer Investments, which closes for consultation on 15 December. These studies will “inform” its next steps to tackle some of the regulatory challenges. The FCA expects to carry out this work during the first half of next year and will provide a further update then.