CA Summit: FCA/adviser stalemate holding back mass market advice

A stalemate between advisory firms and the FCA is threatening the ability of digital propositions to meet the yawning advice gap created by the pension freedoms say delegates at the Corporate Adviser summit.  

Speaking at the summit FCA director of policy, strategy and competition David Geale said the industry had largely failing to innovate in the area of automated advice for the mass market, and argued that there had been no retrospection in the way the regulator had enforced action against advisers.

“We haven’t seen that much innovation in terms of automated advice models,” Geale said.

But advisers argued the regulator has not made its position clear on the provision of digital advice, which had in turned hampered their efforts to innovate in this area.

Aon Hewitt commercial director Tobin Murphy-Coles says: “Aon is chomping at the bit [to offer digital advice] but there is a fear that, retrospectively, there might be a look back [from the FCA] to say we called it wrong at the start. There are a number of [advisers] waiting to see how this plays.”

Murphy-Coles added that building a digital advice service was for Aon ‘a multi-million pound’ investors and so his organisation was therefore understandably fearful of being left exposed should the FCA change its position. 

Geale denied that the FCA is ever retrospective when making regulatory decisions and maintained the FCA is in favour of automated models. However he reminded advisers that it remains their responsibility to ensure all services is robust, that advice is correct and that algorithms used in digital advice models deliver the right outcomes. “There is no reason why digital advice cannot deliver the right outcomes,” he said.

Geale said: ”We have been accused of being retrospective on a number of occasions. We’ve looked back and we can’t find an example of retrospection. I would describe that as looking at the activities of yesterday and prescribing for today and we never do that. We judge by the standards of today. Can I say we won’t change the rules in five years no? But do we support innovation, yes?” 

Punter Southall DC Consulting principal Neil Latham says: “Although you may not feel that is the case the perception is that it is what you do. Employers are concerned about regulation and concerned about any innovation that takes them beyond the leading edge.”

Of course, if you get your algorithms wrong and you end up with customers in the wrong product that is not a good thing, but that is not a good thing whether it is face to face or digital advice.”

Geale also warned advisers to keep digital models simple, suggesting online services should not be used when advising on complex areas.

“The challenge I have seen is people try and run too fast and go into some complex areas quickly before the product has really developed; they want to do everything in one go,” Geale said.

He added that digital advice would be allowed to grow in the UK, noting savers already expressed demand for the products and notes the regulator had looked to the burgeoning market in the US to better understand online models.