The FCA has issued a consultation paper proposing changes to simplify pension and investment advice rules to make advice accessible and affordable for consumers. Thistle Initiatives Consultant, Sophia Ioannou, outlines the key takeaways from the report.
The FCA has published a consultation paper aimed at simplifying its rules for pensions and investment advice, to reduce the advice gap between financial advisers and consumers. The proposals in the CP aim to ensure that pension and retail investment advice allows consumers to make well-informed decisions and suitable choices.
The proposed changes clarify and separate rules in relation to ongoing advice charges. Firms can charge for services related to past advice, even if they do not provide a new personal recommendation each time. These services can be one-off or ongoing, provided that they relate to investments previously recommended.
Firms must still comply with the Consumer Duty, including the provision of services which meet a clear customer need, ensuring charges represent fair value, ensuring clients receive clear information on costs and services and ensuring clients can cancel ongoing services at any time. Justifying the ongoing service and showing that it provides fair value relative to the cost helps lower asset value clients by ensuring that they are not overpaying for limited advice, thus making costs more proportionate to the value they receive. Firms may need to review their Fair Value Assessments and charging models to ensure that they meet the Consumer Duty fair value requirements.
The FCA proposes to separate two charging structures: ongoing service charges and instalment payments for initial advice. The latter should stop once the initial advice fee is fully paid off. Firms would need to review and update existing agreements, ensuring transparency and appropriate disclosures in all contractual agreements.
The changes will provide greater flexibility and lower access costs as clients may be able to pay only for limited or occasional support, rather than paying for ongoing advice. This makes advice more affordable for clients with lower asset values, helping to reduce the cost barrier to accessing advice.
The FCA proposes to remove the mandatory annual suitability review and replace it with a more flexible requirement, which will require firms to conduct a periodic suitability assessment at a frequency based on the client’s needs and circumstances, in line with the Consumer Duty. Firms must clearly explain the scope, cost and frequency of reviews and ensure services provide fair value, and they can use technology and different communication channels to deliver these reviews more efficiently.
This could allow firms to provide more flexible and lower-cost advice services, which can make financial advice more accessible and better value for clients with lower asset values, helping to reduce the advice gap.
Sophia recently joined Thistle as a Consultant in the Investment Wholesale team. She holds a Bachelor of Science in Psychology from the University of Nottingham and brings a strong foundation in investment compliance. Before joining Thistle, she worked at a hedge fund where she supported regulatory development projects and contributed to policy reviews, giving her practical insight into how firms adapt to emerging requirements. She has also completed the CISI Introduction to Securities and Investment and Global Financial Compliance modules, which further strengthened her technical knowledge.