Financial Advice Market Review should result in ‘safe-harbour’ laws

Wealth Horizon's Chris Williams believes ‘safe harbour' legislation could bring about a regulatory environment that recognises caveat emptor, or buyer beware. Scott Sinclair reports

The introduction of ‘safe harbour’ legislation for financial advisers would be a welcome step towards rebalancing liability between advisers and clients, according to one stakeholder, after the government announced a major review looking at how advice could work better for consumers.

Chris Williams, founder of robo-advice investment business Wealth Horizon, said there “had to be a view that consumers are able to make their own decisions”.

The government and Financial Conduct Authority (FCA) have launched the Financial Advice Market Review (FAMR), which has been set up to improve less wealthy consumers’ access to financial advice.

As well as looking into the apparent advice ‘gap’ for savers, it said the review would examine the role “regulatory carve-outs such as a so-called safe-harbour” could play.

Safe harbour legislation exists in both the US and Australia: in the former it means employers cannot be sued if they followed certain steps when arranging employees’ pension investments that later went awry; in the latter it outlines the steps financial planners can take to ensure they meet a statutory obligation to act in clients’ best interests.

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Wealth Horizon’s Williams said ‘safe harbour’ legislation could bring about a regulatory environment that recognises caveat emptor, or buyer beware.

“I’d like to think there’d be some form of safe harbour developed,” he told Professional Adviser. “There has to be a view that consumers are able to make their own decisions based on relevant information. Trying to instil that level of responsibility and determination for consumers would be really important.”

Inertia

However, Williams said he did not believe it is because of fears around liability for advice that has prevented firms from exploring models that cater for the mass market.

“Liability for advice is a factor, but it’s not the main issue,” he said. “As much as we need the regulator to evolve, the industry needs to step up to the plate as well.

“There have been all manner of convenient excuses to hide behind. Established players have been slow to evolve. It’s about the inertia of the industry, not wanting to challenge its own models. There’s a high net worth market to serve.”

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