Many advisers are unaware that they can offer focused rather than full advice for product-specific enquiries, causing advice gaps in areas such as with-profits, says the FSA.
Insurance sector leader Sarah Wilson says some of the existing market deficiencies may be caused by advisers being uncertain about FSA rules.
She says providers are sometimes unsure about the boundary between information and advice and advisers are sometimes unaware that they can offer focused advice.
The FSA’s with-profits research paper, out last week, warns that focused advice firms must take reasonable steps to ensure that they have enough information about the client relevant to the service it has agreed to provide.
The regulator says its quality of advice research found that some advisers were not making it clear whether they were offering full or limited advice. It says it prefers the term focused rather than limited advice after a recent Fin-ancial Ombudsman Service newsletter highlighted its concern that some advisers were using this term to offer inadequate advice.
For with-profits, the FSA says it expects the adviser to at least assess the strength of the fund, the terms of the policy, the customer’s attitude to risk and how the policy fits with other investments.
Wilson says: “We have recognised that some existing market deficiencies may be related to uncertainty as to our existing rules. Advisers are unaware on occasion of their ability to give focused as opposed to full advice in response to a product-specific enquiry from a customer.”