FCA proposes ways to make financial advice more accessible – HL comment

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The FCA is consulting on proposals to create a separate, simplified financial advice regime, making it cheaper and easier for firms to advise consumers about certain mainstream investments within stocks and shares ISAs.

The regulator is consulting on:

  • Streamlining the customer ‘fact find’ so advice is more straightforward for both firms and customers
  • Limiting the range of investments within the new regime so the advice is easier to deliver and understand
  • Making the qualification requirements for the new regime more proportionate so delivering the simplified advice is less costly for firms
  • Allowing advice fees to be paid in instalments so customers aren’t burdened by large upfront bills

Chris Hill, CEO, Hargreaves Lansdown said: “We support the FCA’s move to make investing simpler and it’s great that the FCA recognises that today’s all or nothing approach to advice doesn’t suit everyone, especially those with sufficient savings who are started out on their investment journey.  The proposal should help narrow down options for those who want to invest, but aren’t sure where to start.

But this is just one group of people who would benefit from investing.  We know from our Savings and Resilience Barometer that the majority of households with sufficient savings do not invest and are missing out from longer term returns.  At HL, we can see from interaction with our guides and information online that people often need help earlier in the planning process.  Others need help to decide whether they should invest at all, or which tax wrapped product is better for them.

The proposal only solves a small part of the much bigger advice gap problem and we welcome the fact the FCA committed in September to a much wider holistic review of advice and guidance.

For a long time, Hargreaves Lansdown has recognised that the advice boundary is the key barrier to our ability to guide clients towards better outcomes.

This review is a big opportunity to demonstrate how we can use today’s technology, data and innovation to guide people with their financial choices.  If we don’t allow for more personalised guidance using this new technology, we’re missing the opportunities which OpenBanking, the Pensions Dashboard and, in due course, Open Finance can bring.  This is crucial if we are going to do everything we can to help savers and investors in the cost-of-living crisis and support the nation as we rebuild our financial resilience in the longer term. We have experienced this with our Better Investor programme where we send targeted nudges and can see beneficial changes made by our clients.

The way to help far greater numbers of consumers with their financial decisions is by:

  • Allowing firms to better personalise their content under a new regime for personalised guidance. This improves understanding, engagement and decision making as HL has shown with its Better Investors nudge programme (see below)

Doing so allows firms to innovate to allow them to make better use of data on client behaviours and activity, for the benefit of their clients, to help them to improve their decisions and outcomes

  • Improved personalisation and nudges feed into the new HL Augmented Advice and Guidance service due to pilot launch shortly”

Augmented Advice and Guidance

HL is working on its augmented service that will leverage data and digital technology combined with human expertise, to support clients in the moments that matter, offering easy transition to advice that is only provided when needed and only paid for when used.

Better Investors

HL already uses data to help improve client decision making through our Better Investor programme. This learned experience is how and why we know people want more support and what that support looks like:

  • 685,000 clients have received at least one nudge through the Better Investor programme. All clients falling into our audiences have been contacted at least once, with strong engagement.
  • Visits to the financial education section of our website, Learn, are up 64% YoY.
  • Four metrics are targeted: Diversification, Risk, Cash and Rebalancing
  • All these metrics have seen improvements, up to 6.7% – a good set of results against a challenging economic backdrop and record low levels of investor confidence.
  • Content and communications are already being iteratively improved.

The HL US fund launch results on Better Investor scores

  • We saw a significant change to clients’ portfolios post launch for those who placed an instruction for the US fund.
  • 38% of clients who invested in the HL US fund at launch were in the Better Investor target audience groups for diversity, risk or cash. Investing in this fund significantly improved the diversification of their portfolio
  • 88% of clients who invested in this fund at launch subsequently moved out of the Better Investor target audiences, which shows how our programme and proposition is helping our clients to build a well-balanced and more diverse portfolio, which we know from our research is better for investment outcomes and performance.

Chris Hill, CEO, Hargreaves Lansdown said: “This amendment from Harriett Baldwin is extremely welcome.  The FCA’s evaluation of the Retail Distribution Review and the Financial Advice Market Review found that 4.1 million people receive financial advice, 12.5 million are receiving some more generic guidance and 35.8 million people are getting no support with their financial decisions at all. At the same time, we know more and more about our 1.7 clients which gives us such unique insight into the retail market through data from sources like open banking, and from understanding their digital journeys.

“We know we would have the power to nudge clients towards better outcomes if we were better able to simplify client journeys, helping them with decisions.  Harriett’s amendment provides the opportunity for the Government to open up innovation, within a regulated environment, to help the majority of people can’t afford or access full financial advice.”