The recent return of several of Britain’s largest banks to the retail investment-advice space was interpreted by many as being a recognition that, in an improved economic climate, increasing numbers of smaller investors were seeking financial advice. The banks, of course, have the resources to deal with the stringent regulatory framework that has emerged since the financial crisis. For many IFAs, though, the costs of compliance are prohibitive and are deterring them from offering their services to the mass market. Metlife has joined industry calls for the simplification of the regulatory regime, arguing that this will enable IFAs to provide advice to a broader base of customers.
What Is Metlife’s Main Contention?
Metlife’s statement was based on research the company commissioned as part of its response to the Financial Advice Market Review, which was launched last year. The data collated suggested that a majority of advisers believe that expenses associated with providing advice outweigh the potential returns. Over half of advisers also say that the regulatory environment and the risks attached to the provision of advice are the principle factors preventing them from engaging with the mass market. Dominic Grinstead, Managing Director of MetLife UK, said that the existing regime is not serving the “less well-off”. For those customers with “less sophisticated” investment needs, he argued, a simpler advice model may be suitable. This would warrant a steam-lined regulatory framework which would help to cut costs and make financial advice more accessible to customers.
The UK’s regulatory system is frequently criticised. It was, for example, cited as a key reason for HSBC considering moving its headquarters, although this threat appears to be receding. Metlife, however, points out that there are other issues. For instance, new technologies need to be harnessed, both to improve and diversify services for the mass market and to help automate compliance.
Certainly, there are new waves of back office systems for IFAs, such as those provided on the Intelliflo website, which are designed to ease the burden of regulatory compliance and risk management.
Finally, Metlife asserts that education is central to a more inclusive financial services sector. Accordingly, ways to access investment advice should be included on school curricula. Employers, similarly, should be allowed to offer financial advice as an additional optional workplace benefit to encourage more people to invest.