We welcome FCA proposals, but want no consumer left behind.
its response to the FCA’s consultation on broadening access to financial advice, (CP22/24), interactive investor, the UK’s second-largest investment platform for private investors, expressed its support for the need to address the advice gap.
However, interactive investor fears that the current proposals, while welcome because they recognise the need for change, could create a cohort of consumers who become the ‘orphaned clients’ of tomorrow.
ii stresses that the current suggestions laid out by the FCA are too focused on equity ISAs, excluding those with different priorities, such as a pension, and also excluding those who have over £20,000 languishing in cash.
These limitations, ii believes, could leave investors facing ‘second generation’ decisions with no access to the same services they used at the outset. This is an arbitrary barrier which will make no sense to consumers.
ii believes the regulator should expand and align the existing investment pathways to encompass the broader target market of investors with excess cash savings, and to also consider the adoption of a ‘kitemark’ approach to these pathways.
Richard Wilson, chief executive, interactive investor, says: “There is huge potential here for our industry to break down the needless and expensive barriers to wealth creation, and help UK citizens level up their own economic futures.
“We want to see straightforward solutions with clear pathways that don’t make people feel anxious or put people off. If the scope is too narrow, we limit ambition and impact - so it’s crucial the FCA gets the balance right.
“Done correctly, this consultation does not just have the power to improve the quality of life for people across the UK. It could also mobilise capital investment in our country, as well as allow crucial innovation in financial technology.
“There is also a broader, more fundamental issue, which is the glaring UK financial literacy gap, which we don’t believe the FCA can solve alone. Government engagement is crucial.”
Product complexity adds another dimension
The FCA’s decision to focus on equity ISAs alone does, however, perhaps chime with something that ii have always felt: that ISAs have become overly complicated and should be simplified. ii has lobbied for a simplification of the ISA regime. Just recently, the platform wrote to HMRC ahead of the upcoming Spring Statement on this issue, among others.
Financial literacy is another key piece of the puzzle
Ultimately, the conversation about the advice gap naturally goes hand-in-hand with financial literacy.
Similar to the FCA’s ScamSmart Campaign, ii believes that the new guidance/advice regime needs to be supported by a public financial education campaign, led by the FCA.
But the FCA cannot do this alone. interactive investor is a strong advocate for financial education in schools. While beyond the scope of the FCA, we believe that financial education should start at school, to help people develop the skills to manage their finances in an increasingly complex world.
In the long term, we feel this would support the FCA's objectives and ambitions, and we believe the FCA and government should begin a constructive conversation about this.
We support the recommendations of the recent All-Party Parliamentary Group on financial education for young people report, which can be found here.
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