Video transcript: FCA consults on pensions and investment advice rules

Transcript

Andrew Strange: The FCA consulted on simplifying the pensions and investment advice rules on the 20 March 2026. This consultation forms part of the broader advice guidance boundary review, which saw the creation of the new targeted support model that came into effect at the start of this month.

During previous discussions, there have been some debate as to whether the regulator needs to create a new simplified advice model, but actually they've stepped back and their approach is to provide additional clarity for firms around the differences between guidance, targeted support, limited scope advice, which is permissible today, and then full holistic advice as well.

To do this, they've really focused on suitability rules. And A, they've tried to ensure some continuity and consistency in the rules, which are currently split for effectively method and IDD type products, with the proposed creation of a new chapter in the Conduct of Business Sourcebook, which will focus on suitability rules for all investment products.

They then really focused on proportionality. And I think I'd characterise it as them taking the stabilisers off. For example, they're proposing to change the amount of information firms need to collect in order to assess suitability to an amount that is sufficient rather than a necessary amount. They're providing clarity that attitude to risk profiling can be a fairly simple process for some consumers. They're providing firms with more flexibility in terms of how they articulate recommendations through suitability reports and actually quite strongly advising firms to move away from treating them as a compliance exercise. They've also sought to deduplicate parts of that new handbook, focusing on existing consumer duty rules where they can be relied upon instead of more formal rules. They've changed some of the proposals around ongoing suitability reviews, allowing firms to think more carefully and be more pragmatic about how often they need to engage with consumers. Taken together, all these things actually represent quite a big change to the advice landscape, both in terms of the type and style of advice that could be given by firms, but also the onus on the firms to be more creative and flexible in the way they're approaching things. It really does feel like the regulator is focused on the outcomes rather than the process here.

The consultation paper also features some discursive chapters, which don't have any draft rules, but do set a tone for the future. Part of that is around the treatment of professional clients, and we've seen other work around client categorisations from the regulator too. But most interesting, the regulator is also again looking at trail commission payments, which are still permissible for pre-2012 products and there is currently no sunset date for that, but the regulator is thinking whether that is appropriate in the new world as well.

Overall, it presents a really interesting opportunity for firms, as I say, to think about both the propositions of what they want to offer and how they offer it, how they want to evidence and ensure consumers are engaging and understanding with products and services, and thinking more holistically around their routes to market and the ability for consumers to move between targeted support limited advice, holistic advice and so on as well. The paper is open for comment for a couple of months, but the regulator wants to crack on with this, so we're expecting to see final rules later this year.