The Financial Conduct Authority (FCA) has made it a priority to help advisers innovate their business models to reach the middle market, chief executive Martin Wheatley said on Thursday.
The regulator realises that firms need more clarity around the borders of advice and guidance and endeavors to provide clearer guidance on how the FCA will approach this space, including liability issues, in a paper out next month, he said.
It will also ask the industry "whether more sweeping change is required" for it to be able to deliver simplified advice.
Wheatley (pictured) said innovation in the advice space is needed to capture the middle layer of consumers that "need to save but are not getting the range of services".
He pledged the FCA will put greater importance on listening to the industry's views on innovation but added the current form of regulation - a tough approach focused on good outcomes for consumers - is here for the long-run.
The FCA has "fast-tracked thinking" on key areas of concerns raised by firms: advice, disclosure and innovation, Wheatley said.
With regards to advice, Wheatley suggested future models could see automated services take over chunks of what is currently an "expensive face to face model".
The cost of advice was made explicit by the abolition of commission by the Retail Distribution Review (RDR), which led to some consumers shying away from paying for it, he admitted.
"Once you explained to a consumer there is three hours of prep time to understand your circumstances, a 90 minute face to face meeting, a 30 minute follow-up letter - when you explain that five hours is charged at £300 - £400 pounds an hour consumers might say I'm not sure I want to pay that.
"Once the cost was explicit that face to face model was quite an expensive model. And there hasn't been a lot of innovation around the alternatives.
"I question and challenge the people who tell me 'well, you can't use computers to generate a lot of what would fit into face to face advice'. I think you can and our challenge will be how do we actually get to that point."
The FCA will also listen to the industry on disclosure issues.
Wheatley said the FCA has "agreed to grant waivers to product disclosures that don't follow FCA guidance to the letter", if firms can "prove they are better for consumers".
The regulator will revisit its own guidance and rules to ensure they are supporting customers and will publish a consultation on possible handbook changes later in the year.
The regulator has also launched "Project Innovate", to encourage innovation in financial services.This will work with tech firms and the industry to look at new technology for services such as online investment.
The FCA will open a dedicated hub in its policy team and launch an incubator to support innovative new firms to enter the market.
A paper exploring how innovation can be supported by regulation and what is expected of firms will be published after the FCA's initial research.