The FCA says it is “open-minded” about changing its independent and restricted advice labels, after admitting they are not well understood by consumers.
In its post-implementation review of the RDR, published this week, the regulator asked for stakeholders’ views on better ways to present information to consumers on the nature of advice services, noting one idea is to take forward a proposal from the Smaller Business Practitioner Panel to introduce a “simple label” to explain the scope of a firm’s advice.
Speaking to Money Marketing, FCA head of investment David Geale says: “Our research shows people did not really understand what they were getting.
“They tended to assume they got independent advice even from a restricted adviser. That says to me there is more to be done to look at how that message is put across, and that could mean we don’t focus too much on the labels, or we focus on a different way of explaining what people do. We are open-minded on that.”
Geale says the regulator could potentially scrap the restricted label and introduce a less stringent definition of independence.
Under the Markets in Financial Instruments Directive II, due to be implemented in January 2017, Europe has proposed a definition of independence which requires advisers to consider a “sufficient range” of providers’ products, and not the whole market.
Geale says: “There will still be a definition of independence because that comes from Mifid II. And anybody who wants to call themselves independent will have to comply with that criteria.
“But beyond that we’re happy to look at whether we keep the restricted label, and whether we do something different in terms of how people describe their services. We will need to do some proper research first.”
In January, the FCA admitted its efforts to clearly set out the requirements of independent and restricted advice were “not working”, but said that to change the labels would only create further confusion.