Speaking at the FSA’s retail distribution review conference in London this week, Thomas said potential risks from the RDR now lie in the “middle ground between what is clearly independent full advice and what is clearly execution-only”.
“In the middle ground between full independent advice and execution-only, any lack of clarity about the nature and extent of the service which the financial business is providing to the consumer has the potential to increase the number of cases referred to the ombudsman service.
“It is not necessary that consumers should understand the regulatory requirements that surround the sales process but it is essential that they should understand the extent to which they can rely on the financial business and the extent to which it is a case of ‘let the buyer beware.'”
However, Thomas said “there is quite some way to go in achieving this”.
Referring to sales processes, Thomas said processes must involve “legitimate encouragement” but pointed out that banks and insurers have struggled to devise potential sales processes which provide such encouragement.
Thomas warned banks and insurers who have approached the RDR as a way of reducing their own risk of potential claims that avoiding regulated advice will not automatic-ally avoid what the FOS considers to be advice.
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