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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In the UK, “once in a generation” reforms are a bit like heatwaves: they can cause much complaining, and are becoming increasingly frequent as the climate changes. Fitting, then, that the Financial Conduct Authority picked the hottest day of the year to announce a new set of rules for the financial advice industry.
The proposals are largely an attempt to undo the damage caused by its last “once in a generation” reform of the sector. The 2012 Retail Distribution Review was supposed to improve advice standards, but left many consumers unable to access any sort of guidance as prices rose and firms abandoned the sector entirely.
The need for change — and the potential benefits — are clear. Just 9 per cent of UK adults received regulated financial advice last year, according to the FCA, and there are now more than 7mn people with over £10,000 of investible assets held entirely in cash.
The new proposals are a step in the right direction, allowing firms to offer more detailed guidance without jumping through as many regulatory hoops. But if regulators and the government want to create a genuinely healthy investment culture in the UK, they should not pin their hopes on a single set-piece to transform habits that have taken decades to form.
In theory, many firms would be keen to offer the new “targeted support” or “simplified advice” services. Banks such as Lloyds, wealth managers including St James’s Place and investment platforms such as AJ Bell have been battling each other for market share, but all of them could benefit from an increase in the market size if more consumers were willing to invest.
The rise of artificial intelligence should help with targeted support in particular: non-personalised suggestions based on what tends to work for specific groups is the sort of task at which large language models excel.
But executives have been burnt by well-intentioned reforms before. They might be more willing to commit to new services if they could be confident that they won’t be punished by an unexpected change in policy a few years from now. The results of a separate review of the Financial Ombudsman Service — which handles consumer complaints — will therefore be key.
Consumers, meanwhile, will need more than just one-off announcements to change their long-held aversion to risk. The head of the London Stock Exchange has called for a return to the “Tell Sid” advertising campaigns of the 1980s, while Barclays has suggested taking lessons from an even earlier generation with a recent study of how the New York Stock Exchange encouraged mass share ownership in the 1950s.
Barclays reckons a campaign needs to run for at least five years to be effective. That’s less exciting than promising a whirlwind transformation, especially to governments that think in electoral cycles, but it would give a longer-term boost to the environment.