Bridging the Advice Gap

Unknown Speaker

Hello everyone, and welcome back to the B-Compliant Podcast. I’m Vicky Pearce, and as always, I’m joined by Rachel MacRae. How are you doing, Rach?

Rachel MacRae

Oh, I’m good, Vicky! And I’m actually quite excited about today’s topic, because it’s something we hear about all the time—this “advice gap” thing that many believe was created by the changes back in 2012 within the implementation of RDR. It’s a real issue, isn't it?

Unknown Speaker

Yeah it is. And the FCA have tried in the past to bridge this advice gap with Simplified Advice and they tried to launch decision trees as part of the retail distribution review (RDR), but their efforts have struggled due to regulatory complexity and the risk of falling within the definition of regulated advice which requires a full suitability assessment. But this area is getting more attention now, with the FCA’s new Consultation Paper—CP25/17, if you’re keeping track. They’re proposing this idea of “targeted support” for pensions and investments, which is meant to sit somewhere between generic guidance and full-on regulated advice. Did you know that only 9% of UK adults actually got regulated advice last year. That’s a really small percentage, isn’t it?

Rachel MacRae

It’s shockingly low! And when you think about how many people have money just sitting in cash, or aren’t saving enough for retirement, it’s a bit worrying. I think a lot of people just feel overwhelmed, or maybe they don’t know where to start. Or they think advice is only for the super-wealthy, which isn’t true at all.

Unknown Speaker

Exactly. So the FCA’s trying to bridge that gap by letting firms offer more tailored suggestions to groups of people—like those nearing retirement, or folks with big cash balances—without having to do a full suitability assessment every time. But, and this is important, it’s not the same as personalised advice. Firms have to be really clear about what targeted support is and what it isn’t.

Rachel MacRae

Yeah, so you can’t just say, “Here’s what you should do with your pension,” and call it a day. You’ve got to explain, “This is general support for people like you, but it’s not tailored to your exact situation.” And most of this support is supposed to be free at the point of use, which is an interesting take. I'm not sure how firms will handle this in practice, or if they will even want to.

Unknown Speaker

Yes we'll have to wait and see how its received by the sector, but the FCA’s aim is to build a bespoke regulatory framework for this, with new conduct standards and an authorisation gateway. They want to make sure it all lines up with Consumer Duty, so consumers get better outcomes and aren’t misled. And they’re thinking ahead, too—making it flexible enough for AI and digital tools, so firms can scale up support as technology evolves. It’s quite forward-looking, actually.

Rachel MacRae

And they’re not stopping there. There’s further talk of “simplified advice” as well, which would sit between targeted support and full holistic advice. So, it’s like a whole spectrum—guidance, targeted support, simplified advice, and then full advice. I like that idea, because people’s needs change over time, don’t they?

Unknown Speaker

They do. And for some firms, it’s a real opportunity to rethink how they engage with clients. But it’s also a challenge, because you’ve got to get the boundaries right—what’s guidance, what’s advice, what’s targeted support. And you’ve got to document it all properly, or you’ll have the FCA knocking on your door. Not literally, hopefully, but you know what I mean. Which is why I think this will likely appeal to larger firms, possibly the banks who could look to add this in as an additional benefit for customers.

Rachel MacRae

Yes I see what you mean, it could be quite difficult for smaller firms to implement. Anyway just to mention, the consultation’s open until the end of August next year, so there’s time to get involved and give feedback. But I’d say, if this interests you, don’t leave it to the last minute. These changes could really reshape how firms operate, especially those working in pensions and investments.

Rachel MacRae

So, speaking of reshaping things, the FCA’s also looking at conduct rules—specifically around non-financial misconduct. That’s stuff like bullying, harassment, even violence. It’s all in Consultation Paper CP25/18, and it’s a big deal for non-banking firms, isn’t it?

Unknown Speaker

It is. Up to now, these rules have mostly applied to banks under the SM&CR regime, but from September 2026, they’ll cover non-banks too. The FCA’s basically saying, “Look, poor culture leads to poor outcomes, and we’re not having it.” They want to stop people with bad conduct records—what they call “rolling bad apples”—from just moving around the industry unchecked.

Rachel MacRae

And it’s not just about what happens in the office. The new guidance will help firms figure out when personal behaviour—like something on social media, or even criminal conduct—becomes a regulatory issue. But it’s not every bit of bad behaviour, is it? The FCA says it’s got to have a significant negative effect, like degrading someone’s dignity. So, it’s not about policing every off-colour joke, but serious stuff that really impacts people.

Unknown Speaker

Yeah, firms will still need to use their judgment. Not every bit of rudeness is going to be a breach, but if it’s serious enough, it’s in scope. And the FCA’s consulting on new guidance for both COCON and the Fit and Proper Test, so there’ll be more clarity on how to apply these rules. I think it’s a positive move, especially for creating safer, more inclusive workplaces. We’ve seen in previous episodes—like when we talked about culture and governance—that these things really do matter for compliance and for business success.

Rachel MacRae

Absolutely. And the again this consultation is open until September next year, with final guidance expected by the end of next year. So, firms have a bit of time to get their heads around it and update their policies. But I’d say, don’t wait—start those conversations now, especially around social media policies. It’s amazing how quickly something can escalate online these days.

Unknown Speaker

Definitely. And if you’re not sure where the line is, that’s what the new guidance is for. But, as always, if in doubt, err on the side of caution. It’s better to have a robust policy and a culture where people feel safe to speak up, than to be caught out later.

Unknown Speaker

Right, let’s get practical for a minute. There are a few key deadlines and updates firms need to be aware of. First up, the FCA’s Section 165 Mandatory Information Request—that’s gone out to all firms now. The deadlines depend on your size: small firms with five or fewer advisers have 12 weeks, mid-sized firms get 10 weeks, and large firms only have 8 weeks. So, if you’re a small firm, don’t get too comfy, because it’ll come round quick especially with the summer holidays coming up!

Rachel MacRae

Yeah, and it’s not just a tick-box exercise. Some of the questions are quite detailed, especially around client characteristics—like gender, vulnerability, and so on. If your management information isn’t up to scratch, it could be a real headache. We’ve already had a few panicked calls from firms who realised their data segmentation isn’t as good as they thought.

Unknown Speaker

Oh, tell me about it. Actually, I was working with a small firm last year—lovely people, but they’d left their Consumer Duty Board Report until the last minute. They thought they had all the data, but when we started digging, it turned out their MI was all over the place. We had to go back and piece together client segments, outcomes, the lot. It was a bit of a scramble, but we got there in the end. The lesson is: don’t leave it until the last week of July! And if you need help, just ask. It’s what we’re here for.

Rachel MacRae

That’s such a good point. Oh and also—because everyone loves a fee update—the FCA’s just published the finalised charges for 2025/26. The total fees are actually down a bit from last year, but the overall funding requirement has gone up, thanks to inflation and some big projects. There’s a new fee-block for motor finance DCA reviews, and the costs for ESG ratings providers are being spread across all firms, at least for the set-up phase. So, it’s worth checking the FCA’s online calculator to see what your individual fees will look like.

Unknown Speaker

And don’t forget the levies—Money and Pensions Service is up by a third, debt advice up nearly 16%, and pensions guidance up by over a third. It all adds up, so make sure you’re budgeting for it. And the FOS levy and case fee are staying the same for now, but with all the noise around motor finance complaints, who knows what’ll happen next year?

Rachel MacRae

Yeah, and just a final reminder—the Consumer Duty Board Report deadline is 31st July. If you haven’t started, now’s the time. And if you want a sense-check or a bit of support, head over to our website and check out our consumer duty toolkit or give us a shout. We’re always happy to help, and honestly, it’s better to get a second pair of eyes than to miss something important.

Unknown Speaker

Absolutely. Well, that’s all we’ve got time for today. Thanks for joining us as we unpacked the FCA’s latest proposals and what they mean for you and your firm. Rachel, always a pleasure.

Rachel MacRae

Always, Vicky! And thanks to everyone for listening. We’ll be back soon with more updates—so keep an eye out, and don’t forget to subscribe if you haven’t already.

Unknown Speaker

Take care, everyone. Bye for now!

Rachel MacRae

Bye!