FCA chief executive Martin Wheatley has warned upcoming guidance on simplified advice should not be used as a “charter for misselling”.
In a speech at Bloomberg’s offices in London last week, Wheatley said the guidance would help advice firms to develop new ways of doing business that do not fall 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 should not be mistaken by firms as any kind of charter for either misselling or abdicating responsibility.”
In February, Wheatley told the Treasury select committee that financial products could be sold online on an advised basis without human intervention.
In his speech, Wheatley said technological advances such as computer programs that learn through experience meant computers were capable of “impossible feats of accuracy and forecasting”, opening up the possibility that they could help fill the advice gap.
Wheatley said: “Likely to be included [in the guidance paper] is the scoping work we have 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 will be guidance offering greater clarity to firms around the broad expectations for supplying limited or simplified advice. And there will be a question posed as to whether more sweeping change is required.”
Wheatley acknowledged 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, we have 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.”
Hector Sants, former head of the FSA, once told the financial services industry to “be very afraid” of the regulator. Wheatley, in an interview with Bloomberg TV after his speech, struck a different note, saying that firms should not be afraid to innovate. “We cannot let innovation and development be blighted by the fact we still have some scandals that we’re dealing with,” he said. “We want firms not to be so scared of innovating and making changes in the industry that they will not bring through the products that people need to save.”
In 2012, Anthony Browne, the British Bankers’ Association chief executive, said banks were “frightened” of developing new products because of regulatory uncertainty.
“A slippery slope which most advisers, I anticipate, will approach with considerable circumspection. It’ll be a minefield in quicksand.”
“If you want the perfect oxymoron try simple advice.”
”I was going to write about independant advice, restricted advice, simplified advice, guidance, execution-only and finally the rights and responsibilities of all parties (that is, consumer, adviser and provider) several years ago, but the then FSA’s paper on the subject was a whitewash.”
“Simplifying advice devalues such advice in the eyes of all concerned. Decision trees on drawdown anyone?”