Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether he plans to make an assessment of the potential merits of introducing additional provisions on (a) the due diligence required of financial intermediaries prior to making recommendations to investors and (b) public disclosure of the fees paid to intermediaries.

The Treasury works closely with the Financial Conduct Authority (FCA) to ensure that the financial advice market works well, competitively and fairly for firms and consumers. As the regulator, the FCA expect financial advisers to understand their client’s knowledge and experience of the transaction being considered, to be fully aware of their clients’ financial situation, and to fully appreciate what the client is trying to achieve.

Financial advisers must disclose their charges to customers prior to any transaction, using a price list or tariff, confirming the specific amounts they will be charged, so customers understand what service they are paying for at what price. In the area of defined benefit (DB) pensions transfer advice, new rules came into effect on 1 October 2020 to ensure that costs and charges are clearly disclosed, and that charges are not contingent on a positive recommendation to transfer. This removes any incentives for an advice firm to act in their own interests, rather than their client’s, and places a value on professional advice, regardless of whether it results in a transaction.

In December 2020, HM Treasury and the FCA published an evaluation of the Retail Distribution Review and the Financial Advice Market Review to understand how the market has evolved since these reviews were undertaken, and to establish what the key remaining policy challenges are. The FCA also launched a “Call for Input: Consumer Investments” last year which looks across the whole investment market and considers systemic issues which may need to be fixed. The FCA are now considering responses.