The FSA is looking at banning non-advised sales where products are particularly complicated or where there is a high risk of consumer detriment.
In its discussion paper on product intervention published today, the FSA outlines that one of the interventions it is considering is preventing certain products being distributed through non-advised channels.
The regulator cites its work on pension transfers and distributor-influenced funds as areas where the FSA says it is inappropriate to use non-advised sales approaches.
The FSA acknowledges that consumer protection is higher for advised sales than non-advised sales, giving the example of investment advisers who are required to recommend suitable products that are in the best interest of the consumer.
But the FSA also argues that financial advice costs money, which would force competent consumers to pay more than they need to to access financial products.
The regulator also says that banning non-advised sales altogether could rule out online sales, which stimulates competition particularly among younger consumers.
The FSA says: “Preventing non-advised sales would not, therefore, be an approach we would expect to use widely, but only for products where the risks are such that they outweigh the costs involved.”
The option of banning non-advised sales for certain products echoes the recent proposal to come from Europe to ban execution-only services.
The European Commission put forward two options in its recent Mifid consultation paper in January: to tighten up the definitions around when execution-only services can be used; or banning execution-only services altogether.
Another option the FSA has outlined for intervening in the product cycle earlier would be to restrict some products to certain client groups, such as professional investors.
The FSA has also mooted a requirement for advisers to hold extra qualifications in addition to being qualified for their core advice activity.
For example, advisers who are qualified to advise on packaged products at the minimum level may be restricted to advising on more mainstream investments, with specialist advisers holding additional appropriate qualifications.