IFP attacks FSA's 'outrageous sweeping statements' on simplified advice
Share
The Institute of Financial Planning has hit out at the regulator’s “outrageous sweeping statements” about who should access simplified advice and questioned whether the regime will be profitable for firms.
In its simplified advice guidance consultation, published last week, the FSA says firms should not recommend retail investment products through simplified advice if a client has basic protection needs that are not being met, would be better off paying down debt or does not have access to adequate emergency savings.
IFP chief executive Nick Cann says there will be people who want to save or invest for the future before they pay down existing debt.
He says: “Many people who have what I would call ordinary debt want to try and save for the future or invest in different things. To say those people should not do that shows we are not really engaging with the customer.
“It is outrageous to make sweeping statements about how people should set themselves different goals and objectives.”
Cann believes that as simplified advice will carry the same compliance costs as full advice for providing documents such as fact-finds and suitability letters, simplified advice will offer little profit margin.
He says: “What the FSA is saying is it has come up with a suggestion. The difficulty is that under the current regulatory rules, the suggestion means a business cannot deliver that sort of service to make any money.”
Thameside Wealth director Tom Kean says: “This guidance adds more confusion to an already confused marketplace. Simplified advice sounds like it is anything but simple.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
View results 10 per page | 20 per page
Readers' comments (18)
John Blackmore | 23 Sep 2011 12:29 pm
Now that "Simplified Advice" is effectively dead perhaps we can move on to "Simplified Sales" ?
No fact find, No Qualifications, No FOS liability equal to full advice BUT rather Regulated Products which can be SOLD at a reasonable price and make a profit for all concerned.
It is not advice but it is what the vast majority of the public need and can afford.
Unsuitable or offensive? Report this comment
James Dean | 23 Sep 2011 12:46 pm
I didn't find the FSA's simplified advice paper particularly surprising, as it did little to differentiate supposed simplified advice from the current limited/focused set of rules that a firm can use now.
The IFP comments are correct that it will carry similar costs and controls and therefore the simplified rules on their own won't provide the 'magic bullet' profitable solution that many were hoping for to serve the middle market. Any proposition must have 'something else' that makes it work.
Having read the paper, I cannot decide whether the FSA are 'suggesting' the process addresses debt, emergency funds and protection or whether they are 'insisting' the process 'must' address it BEFORE they are allowed to invest. I fear the latter.
I think it is fair comment to suggest that a client should at least consider reducing debt, etc., but a bit 'Big Brother' if they won't let you after discounting that decision for some reason.
As the paper is entitled 'guidance consultation' they are STILL not defining a final rule set.
Unsuitable or offensive? Report this comment
James Dean | 23 Sep 2011 12:50 pm
@John Blackmore
You can do that now under the current rules as execution only. helping a client realise they have a need, what options are available and then providing some support for an educated choice is (in my opinion) the challenge to address.
Unsuitable or offensive? Report this comment
Anonymous | 23 Sep 2011 1:00 pm
Based on the FSA's skewed logic then, simplified advice as to whether to repay debt/arrange protection or to enter the employer's "NEST" pensions scheme would be to forgo the mandatory employer contribution (which they will not get in pay instead). Now I might agree that if they have borrowing with high interest rates and NO protection, that makes sense, but if they have SOME protection and borrowing on reasonable interest rates (say under 6%), are the FSA telling us the simple advice would be to decline to enter the employer's pensions scheme?
So much for simple advice....
Unsuitable or offensive? Report this comment
Anonymous | 23 Sep 2011 1:24 pm
Let s face it the FSA make it up as they go along MPPI FSAVCs low cost endowments they were all simple products .THe FSA just want to restock the water for the future so they can continue to pick on the little fish when they have made sales on these new products which will be non cost effective no flexibility and no point in selling .Cheap is not for everone or do the FSA all drive KAs.
Maybe they should look at the debt they have caused and stop harrassing people making it imposssible to make a living.
Unsuitable or offensive? Report this comment
Cassandra | 23 Sep 2011 1:50 pm
Have you ever taken simplified advice?
Has the investment you were advised to buy consistently returned a greater amount than the interest rates you have since been charged on the overdraft and credit cards which you were never advised to repay.
If not, on a no win, no fee basis, please just join the queue.
Unsuitable or offensive? Report this comment
Frank Dennis | 23 Sep 2011 1:51 pm
This is what happens when Regulators, without any qualifications for the task they have taken upon themselves, or any responsibility for their actions, attempt to change a whole (and previously successful) industry instead of concentrating on eliminating rogues and frauds.
Unsuitable or offensive? Report this comment
Anon | 23 Sep 2011 2:25 pm
Bottom line to all you advisers, direct providers, limited service providers. online providers, telephone providers, Goverment bodies concerened about savings pensions and protection black holes. FINANCIAL PRODUCTS HAVE TO BE SOLD THEY ARE NOT BOUGHT.
Unsuitable or offensive? Report this comment
David Oswald | 23 Sep 2011 2:58 pm
It's advice, but not as we know it, Jim. Beam me up (away from all this) Scotty !
With apologies to.......
Unsuitable or offensive? Report this comment
alan mcintosh | 23 Sep 2011 3:22 pm
As much as I fully support professional ethical standards, with a fee practise and 30 years in the industry, I have to concure with Anon comments that this business is rarely bought and people still have to be sold too. The ironic thing is all the cascading wealth that is now managed by IFAs wealth management firms, or whatever they like to be called, has historically come from advised sales from home service to direct sales companies.This off course is all to easy to forget but if you do your research there were in fact very few IFAs or wealth managers about 30+ years ago.Long live the professionally qualified "sales" professional.
Unsuitable or offensive? Report this comment