Britain mulls ‘buy now, pay later’ to make basic financial advice cheaper

By Huw Jones

LONDON (Reuters) -Britain’s financial watchdog proposed new rules on Wednesday to encourage cheaper advice on simple stock investments from April 2024 by allowing consumers to pay fees in instalments.

The new rules target consumers with savings of at least 10,000 pounds ($12,017) to invest for at least five years in a stocks and shares ISA, or individual savings accounts, which offer tax breaks.

“The proposals will create a separate, simplified financial advice regime, making it cheaper and easier for firms to advise consumers about certain mainstream investments within stocks and shares ISAs,” the Financial Conduct Authority said.

The watchdog said its recent Financial Lives survey found that 4.2 million people in Britain held more than 10,000 pounds in cash and are open to investing some of it, a step it said would help them mitigate the impact of high inflation.

The rule changes aim to prevent in-person financial advice from being too costly by streamlining the “fact find” on the customer, limiting the range of investments covered and easing the qualification needed for advice on simple products, the watchdog said.

Fees for advice could also be paid in instalments to avoid a big, upfront bill, it added.

“We expect that these changes, along with the Consumer Duty, should mean core investment advice can be offered to consumers at a lower price point than holistic financial advice,” the FCA said.

The Investment Association, which represents asset managers, said it was an important first step to make it easier for millions more people to access affordable financial products.

Broader investment advice fees typically include a one-off 3% upfront payment and 1% annual charge, the FCA said. The consumer duty refers to tougher investor protection rules which come into force next year.

“While we think that there are areas where these proposals could be extended upon, they represent a significant building block in providing individuals with a safe way to save and invest,” said PIMFA, which represents financial advisors.

Richard Wilson, CEO of interactive investor, an investment platform, said the planned rules represented a “watershed moment” to simplify financial advice, which currently centres around complex suitability homework.

The regulator said its proposals are out to public consultation until February, with changes coming into effect in April 2024.

($1 = 0.8322 pounds)

(Reporting by Huw Jones; Editing by Arun Koyyur and Gareth Jones)