The FCA has raised questions over whether ‘streamlined advice’ can be given in complex situations such as defined benefit pension transfers.
In a guidance note today, the regulator has laid out how firms should approach simplified or focused advice, where the firm or client has limited the scope of the service.
The FCA has reiterated its position that suitability requirements cannot be watered down for recommendations within a more limited boundary.
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 urges advisers to make sure that the nature of the products in its streamlined services are not incompatible with the needs and objectives of the clients it is promoting the service too.
Areas including the affordability of minimum contribution rates and the risks and volatility involved in the products should be considered, it says.
However, it says that some would be difficult to fit into any streamlined process because of their complexity, including DB transfers.
The FCA says: “Some financial products are…unlikely to be appropriate for a streamlined advice process because of the amount of information likely to be needed by the firm in order to make a suitable personal recommendation to a retail client. In general, we would expect that the more complex, risky, highly concentrated or illiquid the product, the more likely it is that firms will need more detailed information about the client’s broader portfolio in order to meet the firm’s suitability obligations.
“This is also likely to be the case where the firm is advising on transferring out of one product into another. This will be particularly important where the existing product is complex, such as a defined benefit pension transfer, and the firm will need detailed information about the client’s needs.”