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FCA: ‘Streamlined advice’ can’t duck suitability rules

The FCA has warned firms offering “streamlined advice” they cannot shirk their responsibilities over suitability.

The regulator also urges advisers to monitor clients receiving a streamlined service so they can step in if any are receiving unsuitable recommendations.

In a guidance consultation published this morning, the regulator sets out its expectations for streamlined advice, where either the firm or the client identifies a defined area that services will be provided on.

The guidance reads: “Although streamlined advice services may be designed to deal with more limited client needs and may not, therefore, involve an analysis of all the client’s circumstances, any personal recommendation which is given to a client through a streamlined advice service must nevertheless be suitable.

“Offering a streamlined advice service, with a narrower scope, does not allow a firm to lower the level of protection due to clients.

The FCA says “self-assessing” elements of suitability, where a client would confirm an investment as suitable or indicate they chose a particular product as being suitable, should be avoided.

Testing out triage

The FCA adds advice firms could put in place a “triage” system at the start of their process to see which clients streamlined advice would be appropriate for.

This could include research on particular products to determine which risk profiles they would fit.

How a ‘triage’ process could work, according to the FCA

The FCA notes that some products may not be suitable for a streamlined process.

The guidance reads: “In general we would expect that the more complex, highly concentrated or illiquid the product, the more likely it is that firms will need more information about the client’s broader portfolio in order to meet the firm’s suitability obligations.”

Firms must also tell clients how any streamlined service differs from other advice options they could use.

The guidance says: “We have seen examples of streamlined advice models which inaccurately describe their service as not providing advice, when in fact they do deliver personal recommendations, or where the nature of the service is hidden away in ‘FAQs’ which are hard to find.”

The proposed guidance, which also includes good and non-compliant practice examples, comes on the back of recommendations in the Financial Advice Market Review that the FCA should clarify its rules around narrow scope advice, which could help lower value clients or those with simpler needs access advice.

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