The FCA has asked the industry to help come up with ways to explain the difference between independent and restricted advice.
In its post-implementation review of the RDR, published today, the regulator, says it would be interested in hearing from industry stakeholders on how to present information to consumers on the nature of advice services.
One idea is to take forward a proposal from the Smaller Business Practitioner Panel to introduce a “simple label” to explain the scope of a firm’s advice.
The FCA says: “We recognise that, in some areas, the transparency rules are not resulting in improved consumer understanding, in particular consumer understanding of the adviser labels of ‘independent’ and ‘restricted’ appears limited and these rules are unlikely to have their desired effects.
“We are interested in hearing stakeholders’ ideas for better ways to present information to consumers on the nature of advice services.”
Research by Europe Economics, published alongside the review, found that many consumers are confused about the advice charges they are paying and that they do not understand the difference between restricted and independent advice.
Europe Economics says: “The implication of this is consumers are less likely to be able to shop around effectively for an adviser and in doing so drive effective competition between advisers. For example, consumers may not experience a clear choice of advice reflecting efficient cost,i.e. they may not appreciate the (potentially) higher cost of independent advice if they do not understand what this will provide them with.”
It adds: “A lack of appreciation by consumers for the services provided by independent advisers may undermine the incentives of these advisers to improve the quality of their advice, or else increase the attraction of the restricted model to them.”