Financial Conduct Authority consults on new financial advice factsheet for employers

The Financial Conduct Authority (FCA) has launched a consultation on proposed guidelines designed to clarify the regulatory framework around financial advice, including the development of a factsheet for employers and pension trustees.

The consultation is based around four of the recommendations made in the Financial Advice Market Review (FAMR), which was launched by the Treasury and the FCA in August 2015 to explore how financial advice and guidance could be made affordable and accessible for all.

This includes the proposed production of a new factsheet for employers and pension trustees, which will set out what help they can offer employees on financial matters without crossing the regulated advice boundary and giving advice they are not authorised to provide. The factsheet will be developed and promoted in conjunction with The Pensions Regulator (TPR).

The factsheet includes information about the situations in which employers and trustees would require FCA authorisation, what advice employers and trustees should or should not provide, and how they might communicate or promote financial products, pensions, and workplace savings.

In addition to the employer and trustee factsheet, the recommendations that the consultation covers include the development of a clear framework for firms offering streamlined advice on a limited range of consumer needs, providing clarity on the standard information required as part of the fact find process and setting out considerations for verifying a fact find that has been performed by a third party, and new guidance to support firms that help consumers make their own investment decisions without a personal recommendation.

The consultation will be issued in two parts, the second part of the consultation will launch this summer and will cover changes to the FCA handbook, consolidation of non-handbook guidance, proposed revised guidance on the amended advice perimeter, and guidance informed by the experiences of the FCA’s Advice Unit in developing automated advice models.

The first consultation will collect feedback on non-advised services guidance by 23 May 2017, and on guidance for streamlined advice, the fact find process, and the employer and trustee factsheet by 11 July 2017. The FCA plans to publish the findings from the first part of the consultation in September 2017.

Alongside this, the Financial Advice Working Group has published its final report on financial wellbeing in the workplace, as well as the definitions of guidance and advice, and on the rules of thumb and nudges to enhance consumer financial wellbeing.

The Financial Advice Working Group has recommended that the Money Advice Service develops a guide and online portal informing employers how they can support their employees’ financial health.

The FCA and the Treasury will review the outcomes from FAMR in 2019.

Kate Smith, head of pensions at Aegon, said: “Employers and trustees are well-placed to help influence employees saving behaviour, but many are concerned about promoting their schemes and pension savings in the fear they might cross the regulated advice boundary. We had high hopes that FAMR would help to allay these concerns with the publication of a factsheet clearly setting out what employers can say to their employees. However, simply reminding employers they can only provide factual information, but must avoid promoting their scheme as it could constitute a financial promotion, will give cold comfort and little reassurance to employers.

“We’re hopeful that the Financial Advice Working Group proposed portal and employer guide will go a long way to addressing this by helping employees to manage their financial wellbeing via the workplace. Thousands of pension savers are stagnating due to inertia and although the ‘streamlined advice service’ could be a breakthrough, many simply will not seek help. The workplace is at the heart of pension saving, but more needs to be done to empower employers to talk more positively about their own scheme, supported by financial advice from the experts.”

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Tom McPhail, head of policy at Hargreaves Lansdown, added: “There is a lot of detailed and dedicated work here. The rules of thumb provide clear, simple messages for all. Above all, we want a financial services system which delivers accessible solutions for all investors, and which encourages them to make the most of their financial future without compromising on regulatory protections.

“Probably the most challenging area and the one most important to get right, is the boundary between advice and guidance; investors need to be able to access cost-effective support while having absolute clarity about the nature of the service they are receiving.”