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FCA may probe ‘blurring of lines’ between advice and execution-only

The FCA says it may investigate an apparent “blurring of the lines” between advised and execution-only services.

Speaking at a Tax Incentivised Savings Association event in London yesterday, FCA head of wealth management and private banking Bob Ferguson said the services offered by some firms were “blurring the distinction between execution-only and advice”.

He said: “We are very conscious that the boundaries of what firms see as execution-only and what firms see as advice are being tested. We may probe into that.”

Ferguson also said firms can expect to see “a good deal of supervisory attention from the FCA” around their charging structures, and questioned whether firms are “rewarding people for taking advantage of their clients.”

Ferguson heads up the new division within the FCA’s long-term savings and pensions team which concentrates on the supervision of wealth managers and private banks. The department has been active since July.

His concerns echo those of FCA technical specialist Rory Percival, who warned in April that execution-only services could be subject to advice rules if customers believe they have received advice.

Percival said: “In practice, the customer’s perception is a very key determinant of whether it is advice or not. One of our lawyers, within what was the FSA, said to me, ‘If it looks and feels like advice, it probably is advice’, and that is actually quite a good test.”



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. If it looks like an unbridled monster, acts like an unbridled monster and feels like an unbridled monster, then it probably is an unbridled monster.

  2. What a surprise. This division was always going to be a bone of contention.

    Something dreamed up by a regulator obsessed with theory and light on practical experience or down to earth common sense. Another example of consulting accountants dressed up as consultants fresh out of college.

  3. By my reckoning the ‘time lag’ between what the industry believes is an issue and what the regulator believes is an issue is approximately 2 years.

    I look forward to 2015 when the FCA realises the average guy in the street isn’t getting advice because the average adviser can’t do it at a price he can afford.

  4. Blurring of the lines I would call it more like breaking right through the lines myself!
    After all execution only was meant to be a client coming to a firm with a written order for the precise product and term that they wanted to invest in with no leading from the receiving firm.

    Compare that with the service offered by Hargreaves Lansdown where the client can watch multiple videos, read case studies, and even have access to Best Buy tables before completing a guided through process that helps the client come up with a recommendation. That doesn’t sound to me like a client coming to a firm with a precise order with no guidance.

    I’ve said it many times before why do financial advisers have to adhere to very strict rules to protect consumer when the other half of the industry basically takes no notice of them.

    Let’s also look at some of the kickbacks that some of these firms are getting from fund managers after, all how do you actually get on the Best Buy table of some of these companies is it purely based on performance and charges, surely these are some of the questions that are good regulator needs to be asking.

    Why is it that an execution only business can still receive commission even though RDR effectively banned it – surely that’s against the principle of RDR. Level playing fields please, that’s all I ask for.

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