The FCA has outlined a series of tests and case studies firms can use where they want to offer guidance services to consumers without straying into advice.
The regulator has published a consultation paper on the implementation of the Financial Advice Market Review, following industry feedback calling for greater regulatory clarity between advice and guidance.
Earlier this year, the Treasury said it would change the definition of regulated advice on retail investments to be based on providing a personal recommendation. This will come into effect from 3 January.
In April, the FCA set out an initial guidance consultation on FAMR, to which it received a total of 17 industry responses.
Firms asked for clarity on a number of issues, including whether the use of best buy lists amounted to a product recommendation, and personalising client communications without giving advice, such as the need to boost pension contributions or use an Isa allowance.
The regulator has 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 FCA says “context is vital” in deciding whether these tests are met.
It adds: “We believe where an adviser says ‘people like you buy this product’ or ‘this is what I would do if I were you’ it is likely to be viewed as a recommendation of what is suitable for the customer or based on a consideration of their circumstances and is therefore a personal recommendation.
“However, we have sought to provide new guidance which we hope will support firms in navigating this issue in a way that will help consumers.”