The FSA has refused to relent on its stance on simplified advice, saying it will carry the same liability and have to meet the same qualifications and adviser charging rules as full advice.
It states the suitability standards for simplified advice are the same as for all other forms of retail investment advice. Industry commentators have warned that if simplified advice has to meet the same requirements as full advice there will be no incentive to provide a simplified advice service for the mass market.
The FSA says an automated simplified advice service may ask a client whether they want they existing investments considered as part of the advice process.
It says the extent of information required on a client’s existing investments may be reduced if specific information such as asset allocation is irrelevant to the service being provided.
Firms should not recommend a retail investment product through simplified advice if the client would be better off repaying debt, or does not have access to adequate emergency savings.
If the client wishes to save for retirement, and the products on offer are not appropriate for retirement saving, the client should exit the process.
The charging structure should be disclosed when the client starts going through the process. The total adviser charge needs to be agreed with the client when the personal recommendation is made.
Advisers who are giving personal recommendations through simplified advice must be qualified to QCF level four and meet the professionalism requirements under the RDR.
If a firm provides simplified advice, it cannot hold itself out as independent for its business as a whole as simplified advice is considered to be a form of restricted advice.
Firms will also have to inform the FSA if they intend to offer a simplified advice service.
The FSA says: “The aim of this guidance is to reduce any perceived regulatory uncertainties that may be discouraging firms from offering simplified advice services. It outlines how the regulatory regime applies to such processes, and our expectations of such services, focusing on the issues raised by the industry.”