Evaluating the FCA’s Approach to Regulating Financial Advice

The Financial Conduct Authority (FCA) plays a crucial role in shaping the financial advice industry in the UK. However, its approach to regulation often raises concerns about whether it is genuinely improving outcomes for consumers or merely adding bureaucratic complexity.

At Fowler Drew, we believe that good policy should empower consumers, foster innovation, and ensure transparency. In this article, we examine the FCA’s policy direction and its impact on the financial advice market.

FCA’s Regulatory Challenges

The FCA aims to protect consumers and maintain market integrity, but its approach can sometimes introduce inefficiencies and unintended consequences. Some key concerns include:

1. Overemphasis on Prescriptive Regulation

• FCA regulations often focus on strict rules and paperwork, rather than encouraging better decision-making.
• This increases compliance costs for firms, which are ultimately passed on to consumers.

2. Lack of Incentives for Innovation

• The regulatory framework does not sufficiently encourage the adoption of new technology, such as digital advice platforms or robo-advisers.
• High barriers to entry discourage new firms from challenging established players.

3. The ‘One-Size-Fits-All’ Problem

• The FCA tends to treat all advice as the same, regardless of whether it is a high-touch service for wealthy clients or a low-cost, digital-first solution for mass-market investors.
• This limits consumer choice and drives up costs unnecessarily.