Basic advice rules, which date back to 2005 and allow the provision of simpler and lower-cost advice to consumers on a range of stakeholder products using pre-scripted questions, previously applied to products that fell under a Mifid I exemption, but are no longer fully compatible with the requirements of Mifid II or the IDD.
The first Mifid directive allowed advisers an exemption to give basic advice on products within its remit.
In a note on its website, the FCA says that new suitability requirements mean that advisers falling within the scope of Mifid II can no longer provide basic advice on stakeholder products within the scope of Mifid.
Firms can still provide streamlined advice on all non-Mifid products.
The FCA notes that basic advice remains distinct from ‘streamlined advice’, where the adviser does not consider products not directly related to clients’ immediate needs.
In the scope off IDD, the FCA’s new guidance confirms a similar change to suitability rules. Firms are no longer able to sell stakeholder products which are insurance-based investment products under basic advice rules.
While these IDD requirements were to take effect on 23 February, the European Commission has delayed until 1 October.
The FCA says: “The Treasury has announced that the government will delay transposing IDD in the UK until the outcome of this proposal has been confirmed. After that we will make our final rules with which firms will need to comply from 1 October 2018.”