FSA: Simplified advice must consider protection needs before investments
The FSA says firms offering simplified advice should not recommend a retail investment product if the client does not have sufficient protection in place.
According to the regulator’s simplified advice guidance, published today, firms should first consider whether clients have any basic protection needs which are not being met.
The FSA says: “It should not recommend a retain investment product if it would be in the client’s best interests to use this money to buy insurance cover instead.”
The regulator says in order to comply with suitability rules, firms should understand the type and level of clients’ debt and should not recommend a retail investment product if a client would be better advised to repay their debt rather than investing.
It adds that firms should not recommend a retail investment product unless they have reason for believing that the client has adequate savings to access in an emergency.
The FSA says: “Firms should not rely solely on a client’s judgement as to whether they are able to cope with their existing level of debt or the adequacy of their savings. If a client has debt that they should repay or insufficient emergency savings, they should exit from the process and be referred on as appropriate.”