Financial Ombudsman Service interim chief executive Tony Boorman says he is “mystified” by industry claims that the FOS is holding back simplified advice.
Advisers have frequently cited a fear of unfair FOS decisions as the biggest barrier to developing simplified advice models. Last year, the Personal Finance Society called on the ombudsman to guarantee it would treat complaints about simplified advice differently from those about full advice.
But in an interview with Money Marketing, Boorman says it is “ridiculous” to suggest the FOS is preventing advisers from developing simplified advice models.
He says: “I have always been mystified by this. I do not think there is a fundamental issue here.
“The industry tends to ask us an absolute question – ‘Can you guarantee that simplified advice will always be fine?’ – which is very difficult to answer.
“What we can do is give the industry some assurance that as long as firms stick to the principles of acting with integrity, treating customers fairly and being clear, fair and not misleading, they will not go wrong.”
Boorman suggests the industry is wasting time arguing over the definition of simplified advice.
He says: “We have always recognised there is a spectrum of advice. What is more important than any of this ‘angels on a pinhead’ debate is customers have a clear understanding of the risks of a simplified advice process.”
Boorman says the biggest potential problem with simplified advice is it is “only as good as the algorithm” it uses.
He says: “If by simplified advice what is meant is a structured set of questions that leads to a particular outcome, then over time there is a risk some firms will tilt the algorithm to give answers that are more commercially attractive.
“History tells us that is a risk regulators would be unwise to ignore.”
Thameside Financial Planning director Tom Kean says: “It may sound nice to be told to develop models in the way we think is best but that opens the door to complaints further down the line. We need further clarity from regulators.”