The FCA has warned non-advised brokers using investment ‘best buy’ lists risk misleading customers if they fail to properly disclose the research into the products.
The regulator has today published the findings of its thematic review into the non-advised market.
It says failure to properly communicate investment research to non-advised customers increases the risk of people choosing investments on an uninformed basis.
The FCA says: “One of the main ways in which some firms sought to assist customer investment selection was through undertaking their own research on the investments available via their service and then publishing the findings. For example, by producing ‘best buy’ lists of potential products.
“A number of firms’ customer research had found that a proportion of their customers valued analysis of potential products and used it to help inform their decision-making.
“This investment research tended to be carried out on either a quantitative, qualitative or combination basis. Firms then updated it periodically. Where firms produce this type of research for their customers, they should take account of the information their customers will need to understand this element of their service and ensure it is communicated to them in a way that is fair, clear and not misleading.
“Where firms do not make this clear, there is an increased risk of customers selecting their investments on an uninformed and potentially misleading basis.”
The regulator also suggests levels of due diligence on potential products was “varied” across the industry.
“All firms conducted a form of due diligence on potential products as part of their new product approval process before including them within their investment range,” the FCA says.
“However, the structure and focus of firms’ due diligence varied. For example, some firms considered additional factors that focused on ensuring only products appropriate for their target market were included within their investment range.”
The FCA’s guidance consultation, published alongside the thematic review, warns non-advised firms who use information to “influence” or “persuade” customers risked straying into regulated advice.
The regulator says: “Generally speaking, giving someone information and nothing more does not involve giving regulated advice.
“However, the circumstances in which information is provided can make it regulated advice.
“For example, if information is provided on a selected rather than balanced basis so that it influences or persuades, this may be regulated advice.
“If, for instance, share price information is given in circumstances which suggest that the firm is communicating that it is a good time to sell, then what appears to be the provision of information may, in fact, be advice.
“Providing definitive guidance on whether something is regulated advice depends not only on the facts of the individual case, but also the context.”