The Financial Conduct Authority has warned execution-only services could be subject to advice rules if customers believe they have received advice.
FCA technical specialist Rory Percival says simply putting a disclaimer on a website to say “this is not advice” is not enough to ensure a business is not responsible for a client’s actions. Instead, he says it will be down to whether a client thinks they have received advice.
Speaking at a roundtable on post-RDR distribution hosted by eValue last week, Percival said: “I don’t think the regulations are absolutely clear cut to allow you to say ‘that is advice and that is not’.
“In practice, the customer’s perception is a very key determinant of whether it is advice or not. One of our lawyers, within what was the FSA, said to me, ‘If it looks and feels like advice, it probably is advice’, and that is actually quite a good test.”
A number of execution-only businesses have launched recently and the FCA says it is concerned about the potential for firms to describe their service as non-advised while continuing to offer a form of advice. The regulator says it will look at the issue as part of its thematic review of non-advised business in the third quarter.
Lansons director of regulatory consulting Richard Hobbs says: “The regulatory regime doesn’t deal with this at all well. You have concepts such as execution-only and personal recommendation and a huge gap inbetween.”
Informed Choice recently launched an execution-only investment service. Managing director Martin Bamford says: “Simply sticking a notice up and saying this is not advice is not enough. As soon as you start talking about best buy lists and featured funds it is quite right that some customers would perceive they are receiving advice.”