The FSA says personal recommendations on retail investments products through a simplified advice process will have to be paid for via adviser-charging, with advisers qualified to QCF level four.
The regulator’s guidance consultation on simplified advice, published last week, sets out three options which firms can consider to support a simplified advice service.
These are that simplified advice is provided wholly through an automated system, that a QCF level four-qualified adviser is on hand to give personal recommendations to clients as they go through the automated process or that the client has access to someone who can answer questions factually as they go through the automated process without giving a personal recommendation.
The regulator says it is particularly concerned about the third option.
It says: “If the simplified advice process is designed so an individual involved is not giving regulated advice, the firm should ensure there are appropriate systems and controls in place to prevent that individual from straying into regulated advice or influencing the recommendations provided by the process.
“We consider it will be particularly difficult for a firm to manage the risk that an individual will give advice if they are talking clients through the process, either over the phone or in a face-to-face situation as opposed to providing ad-hoc help at the request of a client.”
The FSA considers simplified advice to be a form of restricted advice and firms will have to notify clients that the service is restricted.
The regulator also says firms should not recommend retail investment products through simplified advice if a client has basic protection needs that are not being met, if a client would be better off repaying debt or if a client does not have access to adequate emergency savings.
The FSA says the Financial Ombudsman Service will judge simplified advice complaints on the same principles as full advice, including whether advice was suitable or not but it will not expect a full fact-finding exercise to be carried out.
The regulator says it will not be acceptable for a firm to recommend a product that most closely matches the needs of the consumer if that product is not suitable.
It says: “We would expect to see many instances where no recommendation is made because the product suite does not include a product that meets the consumer’s needs.”
The regulator says demand for simplified advice may be dampened by the Money Advice Service guiding more people towards full advice and the introduction of auto-enrolment.
Baronworth Investment Services director Colin Jackson says: “If an adviser has gone through the rigmarole of qualifying to QCF level four, why should they accept a lower fee from simplified advice clients?”