Three people sit at a desk in a work discussion
Evolving client needs and industry challenges
The financial advice sector is adapting to profound shifts: an ageing adviser and client population, a massive transfer of wealth, the rise of defined contribution (DC) pensions over defined benefit (DB). In addition to a younger generation that engages with financial advice very differently from their parents, often through apps and social media.
We're also facing geopolitical and climate uncertainties, changing interest rates, and industry consolidation, not to mention the growing impact of artificial intelligence (AI).
To respond to these changes, our regulatory approach is shifting. We’re continuing to focus on delivering good client outcomes while embracing a more flexible approach to regulation. This allows firms of all sizes, including smaller firms and sole traders, to best serve their clients.
Engaging in open dialogue
We’re having more open conversations with the industry than ever before, this year alone, we've participated in 30, with 10 more planned. This hands-on engagement is vital as we gather feedback and channel it into our supervisory and policy work.
These conversations allow us to stay in touch with where the industry is and we want to make sure we maintain an open dialogue. It’s not just about rules; it’s about a mutual exchange of ideas, data, and best practices to foster sector sustainability and drive better outcomes.
A forward-looking strategy
We’re focusing on 3 key pillars: reducing and preventing serious harm, testing and monitoring standards under the Consumer Duty[1], and the Advice Guidance Boundary Review[2]. Each is crucial to ensuring a thriving, sustainable sector.
1. Reduce and prevent serious harm
We are laser-focused on areas where harm could arise. It’s critical that people approaching retirement get the right advice. Our thematic work on retirement advice has identified best practice and areas for improvement. And we’re carrying out further work to explore the scale of any issues and tackle any harms.
With 90% of new clients placed into ongoing advice arrangements, we’re looking into how these services are delivered.
Last year we set out plans to reduce the Financial Services Compensation Scheme (FSCS) levy on firms by making sure that the polluter pays. This will lead to a fairer, more sustainable market for all.
There has been an increase in the acquisition of firms or their assets over the last 2 years. Consolidation can provide benefits. But harm can occur where this is done without effective controls to promote good outcomes.
2. Testing and monitoring under Consumer Duty
The Consumer Duty[1] is already driving significant change. We’re focusing on the 4 Consumer Duty outcomes (price and value, understanding, support, and products and services). We want firms to deliver tangible benefits to clients and continuously improve their services.
3. The Advice Guidance Boundary Review (AGBR)
Our final priority is the Advice Guidance Boundary Review[2], which we are carrying out jointly with the Treasury. With only 8% of adults taking financial advice and many finding investing too risky or complicated, the advice gap is too wide. We’re working to ensure clients get the support they need at a cost they can afford. We’ve set out a range of ideas and are working through the feedback.
A collaborative future
Change brings both risk and opportunity. By shifting towards a more pragmatic, outcomes-based approach, we aim to encourage innovation while reducing unnecessary regulatory burdens. Our focus is on nurturing a financial advice sector that thrives, serves clients at all wealth levels, and supports investment and job growth.
As we move forward, closer working between the regulator and the regulated will be key. Together, we can make sure that clients are empowered to make good financial decisions, and that the financial advice sector remains strong and sustainable.