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FCA: Simplified advice must not be an excuse for misselling

The FCA will give guidance next month on what it will expect from advisers providing simplified advice in an effort help them target the mass market, but warns it must not be used as an excuse for misselling.

In a speech at Bloomberg’s headquarters in London this morning, FCA chief executive Martin Wheatley said next month’s guidance will help advice firms develop new ways of doing business without falling foul of regulations.

He called on firms to engage with the regulator on the guidance but said simplified advice must not be seen as a way to avoid regulatory responsibility.

He said: “This work shouldn’t be mistaken by firms as any kind of charter for either misselling or abdicating responsibility.”

In February, Wheatley told the Treasury select committee financial products can be sold online on an advised basis with no human intervention.

This morning he said technological advances like computer programmes that learn through experience mean computers are capable of “impossible feats of accuracy and forecasting”, opening up the possibility they could help fill the advice gap.

Wheatley said: “Likely to be included [in the paper] is the scoping work we’ve done into new models of automated advice, as well as feedback from consumer research, industry workshops, meetings with trade associations and so on.

“On top of this there’ll be guidance offering greater clarity to firms around the broad expectations for supplying limited or simplified advice. And there’ll be a question posed as to whether more sweeping change is required.”

Wheatley also admitted that the tick box approach of the past had sometimes led to consumers being flooded with information and said the regulator would give firms room to disclose to clients what they thought was necessary.

He said: ”To support this more ‘organic’ approach, if you will, we’ve agreed to grant waivers to product disclosures that don’t follow FCA guidance to the letter – if firms can work with us to prove they are better for customers. A sensible move I think and one that opens the door, potentially, to greater innovation around disclosure in future.”

Wheatley’s predecessor Hector Sants once told the financial services industry to “be very afraid” of the regulator. In an interview with Bloomberg TV after the speech, Wheatley struck a very different note, saying that firms should not be afraid to innovate.

He said: “We can’t let innovation and development be blighted by the fact we still have some scandals that we’re dealing with. We want firms not to be so scared of innovating and making changes in the industry that they won’t bring through the products that people need to save.”

In 2012, British Bankers’ Association chief executive Anthony Browne said banks are “frightened” of developing new products because of regulatory uncertainty.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 29th May 2014 at 4:34 pm

    A exceedingly slippery slope which most advisers, I anticipate, will approach with considerable circumspection. Just what corners may be cut without someone, somewhere down the line (probably egged on by a CMC) claiming that this rule or that wasn’t followed in the advice process and that the customer wasn’t treated clearly, fairly and wasn’t misled? Ah, we can’t tell you that, you’ll have to use your own judgement in interpreting our (woolly) guidance as to what will be deemed (after the event) to constitute an acceptable simplified advice process. It’ll be a minefield in quicksand.

  2. Balanced View 29th May 2014 at 4:44 pm

    Here Here! Predictive software in my experience is short viewed. Very rarely do I find that anything I get bombarded with is ever interesting to me. This software, I suspect will be looking at short term issues and cannot possibly gain a perspective on peoples long term needs and desires through to end of life which is what we have to deliver to clients. I would love to be proved wrong, but it could take decades to play out.

  3. If you want the perfect oxymoron try – Simple advice.

  4. Dateline … not a few years from now.

    The Google Driverless car arrives at your door to take you to the local shops, on the way it updates the central data base with blood pressure readings, weight readings etc, and whether you have indeed smoked in the past 12 months.

    If you pass the relevant scrutiny, sit back relax, and listen to the simple advice on offer.

    Courtesy of the “Car from the Pru!”

  5. Philip Castle 29th May 2014 at 6:01 pm

    I challenged Martin Weatley and his staff at the Chatham CCL meeting as they hadn’t made it clear to the car salesmen that by applying to the FCA for CCL licences, the 15 year longstop was removed and hence they would have to prove their innocence when challenged and dragged in front of the FOS by any complainant until kingdom come and beyond.
    To the audience Martin Weatley laughed and said something like “what you’re suggesting is somewhat extreme” to which I pointed out that with NO longstop I would agree with him as infinity is as extreme as you can get!
    The irony is that as Harry Katz knows, my firm is a Ltd Company so unless I have done something criminal, then the corporate veil cannot be pierced and if I have done something stupid, whilst the FCA can fine me, bearing in mind the FCAs immunity to any claims of stupidity (as Hector told Andrew Tyrie at the TSC), I am not sure a court would uphold some of what they might look to do.
    Starring in to the abyse if infinity IS frightening Mr Weatley and that is why a Longstop is needed. Whether it is 10 years (as Jack Straw and the MOJ were discussing a reduction too and I have the emails to prove it) OR the current 15 year common law longstop OR if the FCA can justify a longer one, we can discuss, but infinite liability is abhorrent, morally corrupt and for Mr Weatley to continue to tell us we have to prove a need to reinstate a right that other UK citizens have is NOT acceptable.

  6. Simon Kershaw 29th May 2014 at 8:26 pm

    Simplifying advice devalues such advice in the eyes of all concerned. Decision trees on drawdown anyone?

  7. This article, like many others in this publication, gives priority to the interests of the financial advice industry over the protection of ‘normal’ people who put their faith in financial advisors. The injustice is that normal people often labelled as clients or customers are at a disadvantage because of their lack of knowledge or access to information or the time the have available. They therefore need all the protection that they can get

    I write this as a person who has had his old age destroyed, from a financial point of view, because he put his faith in the advice of a financial advisor, and paid a lot of money for it, in respect of a SIPP and some other investments. The advice turned out to be a lot of tosh. The advisor pocketed the commissions and fees, of course, moved up from a BMW to a Porsche and is still on the board of a well known financial services company.

    The worrying fact is that the advisor is still hunting for victims in the Manchester area and they need protection

  8. @ Mike Fenwick

    That is a scary thought !!!!
    Will they be subject to Asimov’s law of robotics ?

  9. @Tony Brown – I have sympathy for your situation, but you aren’t telling us the full story, whilst tarring all of us with the same brush as your “Adviser”. Whilst you should not name names as it could prove problematic for both you and Money Marketing, can I suggest you perhaps speak to the editor and see whether there is a story they can draft for you to share for us as advisers to then comment on?
    It may then improve your opinion of advisers in general.
    By the way, I am NOT touting for your business as the vast majority of our clients are within one hours drive of our offices, which doesn’t include London or Manchester and results in nearly 3/4 of our catchment area being FISH.

  10. Exasperated Me 30th May 2014 at 11:59 am

    I think Hector meant to say ” be afraid, we make mistakes every day, small ones and BIG ones”

  11. I was going to write an article about Independant Advice, Restricted Advice (in all its forms) Simplified advice, Guidance, Execution only and finallyteh Righst and Responsibilities of all parties to a contract (i.e. consumer, adviser and provider) several years ago, but the then FSAs paper on the subject was a whitewash and resulted in me getting in to an argument with Linda Woodall at the FSA about what we could and could not out in a contract with OUR clients. 4 years later, the FCA finally picked up on news reports that I had stuck to me argument and gone ahead (telling them I would) and now we have the spectre of them trying to get me to remove any mention of a longstop from my client contracts, originally by thtreats and now by saying “please”. I will keep yoi posted after my meeting with them next month.

    In the meantime my article had only got as far as headings of a proposed service level base on levels of stupidity;

    Clients (ongoing service) can have our sensible or silly service whcih includes an ongoing service contract (ike your boiler and car) and should be reflected with lack of a longstop all the time the contract continues.

    Customers ( transactional advised) can have both above too, but an ongoing service contract like your boiler and car is recommended and should be reflected WITH a longstop of 15 years commencing from when the ongoing service contract is terminated by either party).

    Non advised can have silly, stupid or we will not transact a very stupid (longstop clock starts ticking immediately and every time advice is sort, the stupidity needs to be identified by an adviser whether the original one or the new or the liability for ongoing errors and omissions moves adviser too)

    Execution only can have all the above, even very stupid, but we will not even tell them they are being very stupid. Personally I don’t do execution only as I don’t want to deal with people who remain stupid AFTER I have advised them (I( have had 2 in 20 years)

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