ABI urges government to reform definition of Mifid advice
The Association of British Insurers (ABI) called on HM Treasury and the Financial Conduct Authority to “go further” in their reforms by changing the limit on advice and guidance to help self-directed investors.
In a statement released yesterday (September 29), the insurance trade body said it wanted the government to reform the second regulation of the Markets in Financial Instruments Directive (MiFID II) in its review of the market in financial instruments. wholesale and retail investments.
Specifically, the ABI proposed that the Treasury amend the Regulated Activities Ordinance to define “what does and does not involve financial advice”.
Alternatively, he said the government could create a new regulated activity allowing “more personalized support”.
The directive was transferred to the UK after Brexit. The government is currently reviewing consultations to adapt regulations to UK financial markets.
Examining the counseling-guidance border in its review, the ABI argued that consumers without a financial advisor would be better served by UK financial service providers.
“This will allow independent investors and retirement savers to get better financial advice from their provider, so that they can be more informed and reassured about their investment decisions,” he explained.
The FCA confirmed earlier this month that it is still exploring new forms of advice as part of its consumer investment strategy and said it is particularly interested in changing its rules so that businesses can more easily provide advice to their clients.
He said this was an area he had received many comments on in his call for papers on consumer investments.
“We are exploring how we can make regulatory changes to enable companies to provide more help to consumers who want to invest in relatively simple products,” he said.
“This can be done by providing advice that offers more personalized support or through better targeted counseling services. “
For the FCA to change its rules, the Treasury would have to change the legislation in this space.
The ABI said the Treasury-mandated reforms would help providers of retirement and investment platforms provide more explanation about risks, scams and remittances.
They could in particular:
- Explain to a client the possible consequences of a lump sum deduction from his pension;
- Talk to a client about what a sustainable retirement income might look like, taking their circumstances into account but without a full research of the facts;
- Provide more details about the risk in the investment channels, such as withdrawal rates not corresponding to the objective of the investment channel;
- Let a client know that people often get a guaranteed income at a certain age to make sure they don’t run out of money in retirement;
- Intervene more strongly to warn customers against scams and questionable investments;
- Help clients decide to transfer from one fund to another, within the same provider, when it is likely to be in their best interest.
The ABI has also said it wants the notification telling customers that their investments have fallen by 10% be removed.
“Often when this happens, clients get scared and withdraw their investments, resulting in cash losses,” he explained. “In most cases, if they stay invested, stocks will recover and continue to make gains.”
Reuben Overmark, ABI’s senior policy adviser and specialist in investment platforms, said: To see them, and the Treasury, go deeper.
“By reforming the advice-guidance border, savers and independent investors will be able to obtain more help and reassurance from their provider on their investment decisions.
“Providers will also be able to reassure customers in times of economic volatility and intervene more strongly to warn customers against scams and questionable investments. “