PIMFA and clearer financial advice

The Personal Investment Management and Financial Advice Association (PIMFA) has added its voice to the call for a clearer look at financial advice. It urges industry, government and regulators to combine forces to promote a more accountable and considered advisory market. In a policy paper published on Monday, PIMFA put forward 12 recommendations for financial advice including a review of the way in which advice is regulated, in particular where high net-worth individuals are concerned, and the creation of new lower cost advice options for consumers.

This is not the first time that PIMFA has called for greater regulation of advice. PIMFA has also stated that its immediate priority this year will be to lobby stakeholder to “ensure that economic harms are included in the upcoming Online Safety Bill to provide greater protection to consumers from financial scams.”

Perhaps the area where the impact of poor quality financial advice has been seen most keenly, is in relation to “pension scams” which have been the consequence of pension savers making use of the flexible ways of taking their benefits. In many cases, better advice or advisors with fewer conflicts of interest would have resulted in fewer pensions savers losing out. There is certainly scope for regulatory action to protect consumers (and regulators have taken action), but employers and trustees should also consider the steps they can take avoid their employees and members becoming victims of scams. This could include referrals to trusted independent financial advisors.

PIMFA’s recommendations tie in with much of the work the Financial Conduct Authority (FCA) has been doing in the pensions sphere. Last summer, contingent fees for pensions transfers were banned and the FCA increased the data it collects from advice firms to be able to supervise the sector better. It may be premature for the FCA to introduce additional measures before monitoring the effect of these new rules. However, with new pensions dashboards likely to increase engagement and activity with pensions savings when introduced in 2023, the issue of advice should be kept in mind to ensure that consumers are properly protected.