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FCA warning over execution-only services

FCA technical specialist Rory Percival

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.”



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There are 39 comments at the moment, we would love to hear your opinion too.

  1. Does this mean MoneySavingExpert, SIPPCentre, Hargreaves Lansdown and Which? et al who all ‘promote’ certain investments will now be taken to task.

    Does it also mean that there will be closer scrutiny of the financial sections of certain popular daily newspapers?

    I for one certainly hope so.

  2. So HG sending out an email saying move your pension to our SIPP, we don’t charge, but you can move your company benefits (but you need to check its OK) Oh and we will put you in a free draw for a new car – is not advice !! Email I got yesterday looked like advice, had to drill down 2-3 pages to find out that it was MY choice!!

  3. Hampshire Yokel 18th April 2013 at 9:16 am

    I have, for many years, been saying that I felt that the potential misuse of ‘execution only’ would / should be investigated.

    I have encountered firms that were clearly giving advice, but have recorded transactions as EO merely to reduce the burden of issuing a recommendation letter and others that saw it as a way of mitigating liability.

    One of the networks used to have a system whereby compliance approval had to be sought in order to transact a case on an EO basis. Each individual case had to be justified as such and it was rare for it to be authorised, unless the client was able to demonstrate knowledge, skills and experience to evidence that they knew what they were doing.

    However, some of the non-advised services are clearly different in this regard. The provide information only (if they are being operated compliantly) and enable the consumer to make informed decisions about what action they decide to take. This would not be suitable for complex products and some high risk investments, but it can be an effective way of consumers being able to make financial transactions effectively and affordably.

    In all cases, it is essential that the operators of such non-advised arrangements are able to monitor the process to mitigate the risk of advice being accidentally provided.

    I recently (much to my pleasure) changed my car to a new Mercedes SLK. The chap at the dealership organising the finance stressed that the service was non-advised. However, he subsequently said that “it was up to me if I took out GAP insurance, but they strongly recommend it”. I did point out that his words seemed like advice to me!

  4. What bit of “This is not advice” is so difficult to understand. I currently use best buy tables for investments, insurance, mortgage and utility products. I would rather see whole market products compared and then it’s up to me to make informed decision rather than seek advise from an adviser. I don’t think I am being advised when I see best buy products. I always double check with at least 3 providers and make sure all details are correct and current before I take the plunge. Is that not what all these COMPLIANT advisers do?

  5. Can we also assume that the Money ADVICE Service disclaimers are also not to be taken seriously as well?

  6. A “Best Buy” table by it’s very name must be advice. It implies that those products listed in it are “better” than others that are not.

    As we have seen over many years, the claims chasers will develop a standard questionnaire that will prompt many “absent minded” complainants that they surely felt they were being given advice.

    It’s the next misselling scandal waiting to happen and the FCA have already lined it up for the CMC’s. EO websites had better make sure their propositions are 1 million percent watertight. You know who FCA & FOS will back every time.

  7. Absolutely essential to the well being of the FCA that they are allowed to charge fees for anyone whoever they are and whatever they do in the industry. It`s called self preservation, get over it!

  8. Now we are beginning to see some real common sense from the Regulator. (At last!) High time this scam was nailed shut.
    In my opinion the only way something can be truly non-advised is if the customer approaches the outlet without having any prior direct inducement or contact from that outlet (that would include direct mail) and the approach was made entirely and exclusively at the discretion of the customer.
    Then the choice of product was made with absolutely no input from the distributor (which has to be provable). That in my view is execution only – anything else is a scam.

  9. Personal finance reporters should be regulated. They give financial advice. That’s what they do. It goes along the lines: “IFAs used to rip you off for commission. OK we got the regulator to get rid of commission. Now IFA’s are expensive as well as crap. Listen to me and you’ll be OK…”

  10. Good comments Sean @ 8:53.

    Anon @ 9:26:
    You are missing the point slightly. But no, that is not all that advisers do, we do a lot more (and also often have access to exclusive deals on financial products that you as a consumer do not have). I would not consider yourself to be carrying out the job of a financial adviser just yet. Bless.

  11. “Instead, he says it will be down to whether a client thinks they have received advice.”

    Can we please have the exact quote that MM is relying on here? Because when it goes on to quote Percival as saying (himself quoting) “If it looks and feels like advice, it probably is advice” that is completely different.

  12. Rory you are having a laugh.

    With the FSA?FCA hemming both advisers and consumer sinto a tight corner you now want to remove one of the few remaining options that these consumers have and yet again try to use the cloak or responsibility to buttress your thinking.

    The real world awaits you – please visit it soon.

  13. I think that Percival’s comments, as usual, contain a lot of common sense.

    As with many of the commentators, I agree that many firms try to get around the advice rules, through execution-only services; when the client is, in fact, selecting from best buy lists.

    That isn’t to say that EO clients don’t exist – my view is that a client is potentially EO if:

    1. They come to us wanting to invest a specific amount in a specific fund without any comment or input from us.

    2. They do not require any opinion from us in respect of whether they should invest; and

    3. They do not require any opinion from us in respect of whether they should not invest; and

    4. They understand and are happy to sign a disclaimer to that effect prior to proceeding.

    Furthermore, I would be reluctant to proceed unless there was documented evidence of a degree of sophistication and relevant experience.

    Not surprisingly, for our firm, EO is the rare exception and not the rule.

  14. This question of advice or execution only was examined in detail in the judgement in Rubenstein v HSBC in 2011. This remains good law.

    The judge said “It is irrelevant whether Mr Marsden [adviser] thought he was only providing information or whether Mr Rubenstein [client] thought he was being given advice. The question is whether an impartial observer… would conclude that advice had been given.”

    Legally this is an objective test (the judge specifically said it was) so it doesn’t depend on what anyone ‘thinks’.

  15. If you go to the WHICH website and typing pensions you will get 36 articles giving detailed information and Best Buy tables. If that doesn’t constitute advice I don’t know what is! Clients perceive information only services as advice and the execution only scam is exactly that a scam and a way of getting around advice without having the liability.

    I have been complaining for a number of years about Money Saving Expert, WHICH and many other sites that seem to operate without having adequate FSA/FCA permission or operating pay for click models. I like many advisers get fed up of the double standards meted out by previous regulator. We can only hope that the new regulator will govern the profession in an even handed way and stop the practice of execution only particularly where there is face-to-face or phone contact.

    One Building society were up until recently selling structured products on execution only basis through an information only service. Surely this is wrong particularly when you have a salesperson egging on the consumer when providing information. One consumer actually took the building society to court because they believed they had received advice. The judge ruled that they had in effect received advice even though the initial disclosure documents stated that the process was a information only service. The judge stated interaction is the key component when judging whether advice is being given.

    I also believe all lead generation companies specialising in IFA leads should be regulated and authorised!

    We don’t need new rules we only need to enforce the existing rules FSMA2000 is very clear if you promote services or products with in financial services you need to be regulated and authorised.

    Execution only is where a client comes to you with the precise product request no interaction between firm and client is allowed. I would say giving detailed information on a website constitutes interaction particularly if these sites run forums and helplines.

  16. In my 15 years as a IFA and 3 previous years as direct sales adviser, I have never once done an ex only case (leaving out top-ups) in my view they just dont happen people always ask for some kind of information or advice

    With the likes of HL and others I would suggest that this type of model is more a direct offer rather than execution only ? but I stand to be corrected.

  17. Hargreaves Lansdown send a newsletter giving case histories and generic advice. Their website does the same. Check it out as this is advice in everything but name. They encourage pension transfers into their SIPP and claim “execution only” as protection and have amassed a fortune. For the adviser to do the same you would spend hours on compliance resulting is fees etc. For years my compliance advisers have told me that regulators WILL NOT accept “execution only” pension business, let alone a transfer into a SIPP on the basis that a layperson does not have the field of knowledge necessary to make such choices. SO HOW DOES HL GET AWAY WITH EXECUTION ONLY?

  18. Here we go again. Angels dancing on semantic pinheads, and a gold rush for the claim chasers.

    If the fund goes well:”I bought this, it is great, aren’t I clever”.

    If it doesn’t: “I thought Iwas being advised, therefore I was advised, therefore I demand my money back, and some.”

    I can’t buy something I’ve never heard of. Someone has to tell me about it, some how. If every promotion is in danger of being deemed to be advice, and every provider is thus forced down the road of fact finding every transaction, the regulator will finally achieve the objective: the total destruction of more or less everything he was set up to regulate in the first place.

    You couldn’t make it up.

  19. Tell me Mr regulator when is advice not advice? This is what the “execution only” Hargreaves Lansdown website says:

    Which pensions can you transfer?
    You can transfer most types of pension to the Vantage SIPP (the total combined value of pensions being transferred must be £1,000 or more), normally without needing advice. These include:

    • Personal and stakeholder pensions
    • Retirement Annuity Contracts (RACs)
    • Other SIPPs
    • Most Additional Voluntary Contribution plans (AVCs) including Free Standing AVCs
    • Executive Pension Plans (EPPs)
    • Most paid-up occupational money purchase pensions
    • Old protected rights pensions accrued from contracting out of the State Second Pension or SERPS (State Earnings Related Pension)
    •Pensions in income drawdown

  20. This is a way of the regulator generating additiona INCOME. Full stop

  21. @ Graeme Laws

    You say that, “I can’t buy something I’ve never heard of”.

    If that is the case, then it must be advice.

    If the client has already made the decision, prior to instructing the firm, then it may be Execution Only.

    We need clarity of this from the FCA, which would clearly be in client’s interests. However, I suspect that the reason for indecision to date is that clarity would result in a clear need to take action against the likes of HL, who are clearly taking the ****.

  22. Look at the FCA Handbook in PERG 8.24 to 8.29. It lays out, with examples, what constitutes advice and what doesn’t. It’s pretty clear.

    No, it’s not absolutely definitive but it does cover 95%+ of situations you can think of.

    In a nutshell, the practical difference is whether there is information or advice. Advice exists where there is comment on the merits (pros and cons) of whether to make a specific investment

    Information is just facts. Providing ‘clients’ with information, however detailed, is not advice.

    The context in which that information/possible advice is given can be relevant where it’s not obviously clear. If you are getting information from an adviser it’s more likely you are getting advice than if you get information from an execution only platform.

    That’s not to say that execution only platforms can ignore the possibility of giving advice and there are probably infringements from time to time, even by the well-resourced ones.

  23. “If you’re a couple, a joint policy covering both people will usually be cheaper than buying two separate ones. However, that’s because it provides a totally different level of protection.

    Joint life insurance pays out on the first partner’s death as standard, then never again. This can leave the surviving partner uninsured – not great if dependants still need protection.

    Couples should get a quote for joint insurance, then do two separate quotes for individual cover, and compare the total cost. Once you know how much extra the joint protection will cost, you can work out whether it is that valuable for you”
    Is this advice? It looks like it,feels like it is and the reader probably thinks it is advice, ergo it must be.
    Pay your regulatory fees martin lewis.

  24. There is a big difference between information like a key features document been published online and clever marketing e.g. case studies designed to give general advice or catchy phrases stating that most personal pensions can be transferred to a SIPP as somebody mentioned earlier.

    Information only means exactly that information on a product with no other marketing or case study support. As many on here of already stated when does information become advice.

    As the FCA as stated in this article when the client believes that they are receiving advice as many do!

    I can’t find the article but a client has already taken a building society to court on this exact point and so I suspect it won’t be long before some other people will take MES and HL to court on this point as well.

    I notice you quote the FCA Handbook which in effect is a code of conduct rule book.

    In your opinion grey area what takes precedent the FCA Handbook or the actual legislation that covers financial services e.g. FSMA2000. In my opinion one is law the other is a code of conduct I could be wrong and am willing to be corrected.

    The code of conduct is the FSA/FCA interpretation of FSMA2000 in the form of a code of conduct.

  25. The FCA derive their powers from FSMA2000 which is quite high level. The wording of many of the rules and guidance is the same as the secondary legislation (statutory instruments) passed to define such things as ‘advice’ and ‘financial promotion’. No surprise as the FSA would have had input to, or written, that secondary legislation.

    Section 150 of FSMA allows an individual to sue an adviser for loss caused by a breach of the rules (with some exceptions). So rules are, to all intents and purposes, legislation.

    If you check out the Rubenstein v HSBC case I referred to earlier you will see that when deciding on the difference between advice and execution only, the judge referred directly to the rules and guidance from the (then) FSA. In fact they were largely reproduced in the written judgement – not surprising given that his role was to interpret not create or change.

    His word is now law, literally. To go against what he said would require another High Court Judge or the Court of Appeal to disagree. Everyone else, including the FCA, must follow…

    Of course there will always be a big enough Grey Area for debate and lively discussion!

  26. Grey Area

    That’s not the case that I was thinking about – it was mentioned by money marketing last year and it resulted in a lively debate.

    The case was about a couple who received information from a building society on a structured product. The service was meant to be information only and even though they signed an initial disclosure document that stated that the service was information only.

    The argument from the claimant’s solicitor was that due to the fact that there was interaction between the client and the salesperson advice had been inadvertently given and therefore the service could not be described as information only. I wish I had the name of the case as it would be handy in this debate may be one of the editors at money marketing could dig up the article and put a link to it on this debate.

  27. Unless I’m mistaken, you are all missing the most important point.

    Any complaint that is not resolved to the claiments satisfaction will wind its way to the FOS; who pays no mind to the Guidebook/Rules (FSA/FCA or any other for that matter!) as it has its own set of unpublished guides and agendas for the complaint handlers.

    If they think they want to give the client/EO person their money back with interest, they will and there will be nothing you can do about it!

    I believe that the early utterings from the FCA seem a million miles away form the arrogance of their predecessors, which must be a good thing.

    I sense some common sense is returning. A change at the FOS and a legal right to challenge them is what is ultimately needed.

    EO or not, the claiment will ‘win’ if the FOS thinks they should. Thats the reality.

  28. I was under the misapprehension that Peter Herd had left the building and was ceasing to pontificate on anything and everything.

    Clearly this rumour was false, much like the rumour that post RDR there would be a queue of punters outside his opffice and gagging to get in because his financial skills and vaulted in their esteem overnight.

  29. It looks like I have my own pet stalker lol

    Eg M Bittered or whatever they put into the name box nowadays.

    At least it keeps him or her busy from pestering and been rude to somebody else as they don’t have anything constructive to say.

  30. You back for good then Pete ?

  31. I’m sorry but precisely which part of, “This is a non advice servce” does the customer not understand?!

  32. RegulatorSaurusRex 19th April 2013 at 4:07 pm

    Execution only is indeed a scam.

    We will ban it.

  33. @ Anonymous 2:36pm

    Probably the bit where he did get advice which didn’t match with what he was told…

  34. As Graeme Laws points out, the CMC’s will have a(nother) field day with this and, as Simon Mansell points out, how HL continue to get away with Execution-Only transfers into their SIPP is truly amazing.

  35. EO case, client complains, it lands with the FOS, case upheld. IFA’s are always happy to pay up……. even when a spreadbetting company goes bust. Mad mad world when IFA’s fund compensation from our client fees

  36. I don’t always agree with Peter Herd, but if I disagree I will do it to his face and not post childish attacks using pseodonames. Shame on MM for allowing these posts to stand. I would suggest you don’t allow them to be posted as you prefer vet them first or are you taking a note out of Citywire’s book? I have no problem with people posting anon vitreol against Nic C as he seems to revel in it!

  37. Whilst there’s always the chance that the regulator will inadvertently demolish another distribution channel methinks the existing non-advised outlets will continue to grow in number.

    By and large I think advisers do a good job but there’s a whole generation of tech savvy consumers for whom the internet is the way you buy things. Add to that the influential media DIY fashionista types plying their trade across the ether and it’s easy to conclude that, however much we all moan about it, this particular juggernaut is building up a powerful momentum and, by definition, isn’t stopping in a hurry.

    It could be a good thing in the end especially if some of the common sense stuff influences the consumer who may rightly ask why the advised process is so damned complicated?

  38. So does this mean that I can sue HL? With full knowledge of what I was doing and without thinking that I was getting any sort of advice, I have got a chunk of my Vantage SIPP in Blackrock Gold and General (45% down) and JPM Natural Resources (42% down), both of which are as it turns out on the 150 list.

    I think that based on the way that the HL platform works for an investor, you would have to be a blithering idiot to think that you had received advice.

    They provide information on the fund and some analysis, but at no point do they say that this is right for you.

    I would also suspect that seeing as the bosses of HL are billionaires, they will probably be able to afford better lawyers than the FCA if it came down to it. This is after all a grey area and not blatant mis-selling like PPI.

  39. Fully agree ,i had a sharedealing account with barclays stockbrokers ,and called to buy some shares ,and one of their staff recomended and went on to open an account online for me ,saying it was desame as the certeficated account ,but cheaper and no need to call them .
    Based on that information i agree ,he open the account ,online as i gave him my details ,and send the documments were i signed and returned .
    But the he never mention that this account had a feature called ATI ,that is iqual at a margin account ,also their terms and condittions says nothing about it .
    Once you use the account they double you the money you have in your portfollio ,then on the third day they ttreble that money ,so your portfollio that is worth 5.000 pounds allows ,you to buy 15.000 pounds of shares ,
    Then if you dont pay they will sell your shares .plus 40 pounds fees and interests ,.
    as a result i lost all my money even so i asked them to removed that so called ATI it was refused .
    We contact the ombudsman to explain and ask ed for help ,but barclays is fighting back saying they are an execution only and they are not responssible .
    So they not only recomendded this account but also open it for me as i tould them i did not knew how it works ,but now execution only not responssible for anything .The case still ongoing with ombudsman but they still refuse responssability ,even so a senior menber of staff said to us on an email. WE ARE NOT ALLOWED TO RECOMEND ANY TYPE OF ACCOUNT ,the fact is they did and they open it .We lost alot of money and canot see an end to it and recover our money that their advised and misguide cost us .

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