The Financial Conduct Authority (FCA), Great Britain's financial market watchdog, has proposed a set of new rules to lower the cost of financial advice for the average UK investor and to make investing more accessible.
According to the FCA statement, more than 4 million people in the UK hold more than £10,000 in excessive cash and would like to invest it. However, most do not know where to put their funds, and access to personal financial advice on the island is relatively expensive.
Very high inflation means holding cash leads to 'financial position damage'. The elevated cost of financial advice is due to heavy regulation of the local market, but the FCA sees this as an opportunity to support mass consumers and their more straightforward investment needs.
"Now more than ever, people across the UK should have access to useful and affordable financial products and services which can improve their quality of life and support the economy. These proposals are part of our work to deliver a consumer investment market where people can readily access support and firms aren't deterred from providing it," Sarah Pritchard, the Executive Director of Markets at the FCA, commented.
Accordingly, the regulator is consulting on four proposed changes. It wants to limit the range of investment within the new framework to make advice easier to understand and deliver. What is more, the qualification requirements for advice under the new regime would be lower, so the overall cost for the consulting firms would decrease.
In addition, the FCA wants to give consumers the ability to pay the advice fees in instalments and enhance the 'fact find' process. It is supposed to simplify the entire advisory procedure for consumers and companies.
Proactive Efforts to Protect Consumers
Financial advice public consultation marks another FCA step to better safeguard consumers and retail traders in the UK during a period of heightened inflation rates when people are looking for new ways to protect their capital.
The FCA announced three weeks ago that between July and September 2022, it acted 4,151 times to amend or withdraw rogue financial promotions. The most common breach involved the contract for difference (CFD) industry. The platforms encouraged consumers with incentives that could distort the risky image of the investments they were executing.
The regulatory watchdog issued another warning last week, focusing on the excessive gamification of the trading industry, which may work against traders' best interests. Like incentives mentioned above, trading app design and excessive push notifications can lead to FOMO (fear of missing out) and overtrading.
