Article by Phil
The Financial Conduct Authority (FCA) has said that firms will be able to provide simplified financial planning from early next year.
This has been on the cards for a while and is aimed at the 90% who do not use a financial adviser. Many because of perceptions about the cost of advice. Or because they don’t understand what their savings and investment options are. Millions may benefit from the changes which will only apply to simplified financial planning advice about pensions and investments. Some estimates suggest that there are 25 million people who could benefit.
The broad idea is that firms will be able to make recommendations to groups of people without having to understand their individual details. So that the advice is not specific but generic. Recommendations will be able to be given to people based on their broad characteristics. For example, people who are drawing down from their pension pot, or who have significant savings sat in cash accounts. Firms will be able to say something along the lines of “people like you may benefit from” and then make a product recommendation.
Pension advice needed
There’s no doubt that more simplified financial planning advice is needed, especially around pensions. People need help to plan for their retirement and help to work out how to best manage their pensions once they get them. This especially important as the state pension is likely to be under threat.
The institute for Fiscal Studies (IFS) says that the government should scrap they triple lock for the state pension because it is unaffordable. They suggest increasing the pension to 33% of average earnings instead, over a period of time. This would save money over the triple lock but ensure that the state pension age doesn’t have to increase.
FCA to keep an eye on simple pension advice providers
The FCA are at pains to say that they will be watching for providers just trying to promote their own products for financial again. The requirements of the Consumer Duty will still need to be considered before any simplified advice is provided. Marketing rules will also need to be considered. Many customers have opted out of direct marketing services. That means that many people will not be able to receive any communications about the simplified advice offers a firm may think they could benefit from.
Many advisers are also concerned about the impact on savers if the simplified financial planning advice recommendation outcomes don’t turn out to be beneficial to the buyers. Will there be any comeback as there is now with regulated firms through the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS). After all the FSCS paid out over £320 million in compensation last year through over 12,000 claims.
What will the simple financial planning cost
The FCA are hoping that firms will provide the new service for free, although firms will be able to charge if they think it’s appropriate. No one has yet said whether are going to offer a free service though.
Low cost is important however as it’s the existing cost of advice which is a barrier to advice. Although some firms have reduced their advice costs. For example, market leader St James Place have announced their new charging structure which will come into effect from late August. The new initial advice fees will be 3% on investments up to £250,000, then 2% for the next £250,000 and 1% for investments over £500,000. It has taken them a few years, but they have finally come round to adopting a staged approach to advice fees.
We implemented a staged approach years ago and our fees are still lower.
Get more information.
For more information about simplified financial advice, why not contact Christina today. We offer a free initial meeting to discuss your requirements and explain how our service works. You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
