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FCA issues further guidance on ‘personal recommendation’ standard

The FCA has finished implementing the recommendations of the Financial Advice Market Review with the publication today of a policy statement relating to personal recommendations today.

The FCA aligned itself with Mifid II last year by mandating that regulated advice must contain a personalised recommendation.

In August last year, the FCA published a consultation paper that included amendments to guidance in its “perimeter guidance manual” on what amounts to a personal recommendation.

The consultation paper reiterated earlier guidance, which is consistent with European rules, which sets out a series tests to determine whether a service amounts to giving regulated advice, including:

– Does the service being offered constitute a recommendation? For example, firms need to consider the difference between information and recommendation, and whether help a customer to filter data amounts to a recommendation

– Is the recommendation presented as suitable or based on individual circumstances? For example, firms need to consider the impact of disclaimers and what might appear to be a suitable recommendation

– Is the recommendation given other than through distributions channels or the public? For example, firms need to assess recommendations given online, where recommendations are offered to multiple customers at once, and the effect of sending out investment research

The regulator had several responses to the consultation asking for more detail on the proposed guidance and others asked for examples of how firms can support customers without giving them a personal recommendation.

It was asked for examples for situations including on how to support execution-only clients who might not have considered all of their options, and how to present product options in a way that links them to general investment objectives and other factors.

The FCA says: “Firms that provide services that support customers without giving a personal recommendation (or firms that might wish to provide such services) should consider our new perimeter guidance. Firms that provide advice and/or guidance services might wish to consider making our consumer guide available to consumers.”

It adds that the publication of its new perimeter guidance is the final step in the FCA’s implementation of the FAMR recommendations.

It expects to review of the impact of the FAMR recommendations in 2019 and publish its findings in 2020.

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  1. The FCA says: “…Firms that provide advice and/or guidance services might wish to consider making our consumer guide available to consumers.”

    The FCA website says: “We can’t find the page you’re looking for. It may have been moved, updated or is temporarily unavailable!”

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