Chancellor George Osborne and consumer watchdogs are making financial firms feel the pain of a continued onslaught against high costs of managing money and giving advice.
In recent years, financial firms have seen legislation capping charges on pensions and new rules limiting exit charges on flexible access drawdown.
Now, the big guns have turned on the cost of financial advice.
A new report from the Financial Conduct Authority, which regulates the financial services industry, says pension and savings advice is too costly.
The FCA wants firms to provide more, cheaper ‘robo advice’ rather than have IFAs charge inflated fees for their time.
Clearance for robo advice
Robo advice is a new concept in financial services that allows computerised responses to common financial questions posed by consumers.
Several firms are already promoting or readying robo advisors online.
The FCA says robo advice allows specific answers to specific questions without the need for face-to-face meetings.
The Treasury and FCA are keen to see millions of ordinary savers and investors with small amounts of cash with financial firms win cheaper advice.
The FCA is concerned about an advice gap left by retiring IFAs who find new compliance rules too strict and the departure of banks from the market after years of fines and scandals over misselling financial products.
IFAs too expensive
Charles Roxburgh, director general of financial services at the Treasury, said the government needs to intervene in the market to safeguard consumers and to help the industry deliver cost-effective high-quality advice and guidance.
The report recommends developing more robo advisors and working on better definitions of advice and guidance so customers understand what they are being told.
The Chancellor also announced a consultation on proposals to let pension savers draw up to £500 from their funds to pay for professional financial advice so they can make better decisions about how to invest their retirement savings.
In the survey, conducted by the FCA, many consumers complained that the rules and jargon around saving and investing were too complicated and that they did not understand how to make the right financial choices.
