The regulator is consulting on these proposals which aim to make financial advice more straightforward, accessible, and to lower the costs to providers and investors.

Once in place, the new regime would encourage more people to invest their money, instead of leaving it in cash accounts paying little interest.

It comes as savers are urged this week to switch accounts as money in savings accounts tops £1 trillion for the first time. 

The FCA has proposed that a separate financial advice regime is created which would make it cheaper and easier for firms to give people advice about mainstream investments, such as using stocks and shares ISAs.

By adjusting the guidelines providers need to follow, the FCA says it would be easier for providers to help mass-market investors with simpler needs.

The changes would also make it cheaper for people to access financial advice, which is currently one of the main barriers to access.

Holding too much cash can be financially damaging

It comes as the watchdog found 4.2 million people in the UK had more than £10,000 in cash accounts and were open to investing the money.

The FCA says while it’s vital to keep an emergency pot of money in cash, having too much money can be damaging as inflation, currently at 11.1%, reduces the value of the money.

It is consulting on the following features:

• Streamlining the customer “fact find” so advice is more straightforward
• Limiting the range of investments so advice is easier to deliver and understand
• Making the qualification requirements for the new regime more proportionate so delivering simplified advice is less costly for firms
• Allowing advice fees to be paid in instalments so customers aren’t burdened by large upfront bills

The consultation will be open until 28 February 2023 and the FCA said the new regime could be implemented before the end of the 2023/24 financial year so firms will be able to start offering core investment advice from the beginning of April 2024.

Sarah Pritchard, executive director of markets at the FCA, said: “Now more than ever, people across the UK should have access to useful and affordable financial products and services which can improve their quality of life and support the economy.

“These proposals are part of our work to deliver a consumer investment market where people can readily access support and firms aren’t deterred from providing it.”

“The proposal only solves a small part of a much bigger problem”

Investment providers have broadly welcomed the proposals but many say they don’t go far enough to solve some of the issues with access to advice and making investments more accessible to more people.

Richard Wilson, chief executive officer for interactive investor, said: “This is a watershed moment in the UK. It will determine whether we can begin to change the narrative around long-term financial wellbeing.

“Get it right and the financial services industry can find simple solutions that break down barriers to advice and crucially, reduce the advice gap. What we need is simple solutions, with clear pathways that don’t make people feel anxious – solutions that are easy enough that people will actually do it.

“Financial advice currently centres around complex suitability homework which gets in the way of finding simple, affordable solutions. This is joined up, right way round thinking from the regulator. It’s a big deal.”

Chris Hill, chief executive officer for Hargreaves Lansdown, said: “We support the FCA’s move to make investing simpler and it’s great that the FCA recognises that today’s all or nothing approach to advice doesn’t suit everyone, especially those with sufficient savings who are starting out on their investment journey.

“The proposal only solves a small part of the much bigger advice gap problem and we welcome the fact the FCA committed in September to a much wider holistic review of advice and guidance.

“This review is a big opportunity to demonstrate how we can use today’s technology, data and innovation to guide people with their financial choices. If we don’t allow for more personalised guidance using this new technology, we’re missing the opportunities which OpenBanking, the Pensions Dashboard and, in due course, Open Finance can bring.”