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FSA refuses to back down on simplified advice

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.

The regulator has published its final guidance on simplified advice today, following a consultation paper last September.

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.”

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Comments

There are 20 comments at the moment, we would love to hear your opinion too.

  1. Oh dear. I suspect the take up of simplified advice by firms will be virtually nil.

    If you had a choice of developing simplified advice or refining focused advice (which already exists and has experience of being delivered) then why would you go simplified? They both need QCF/L4, both have adviser charging, both have the same regulatory responsibility, but focused advice is not as restrictive in how it is delivered. With focused advice you have the opportunity to be flexible and pragmatic with a client, as everyone is slightly different, even with simple needs. Simplified may be very ‘efficient’, but when it comes to dealing with real live people how ‘effective’ will it be?

    I see focused advice combined with assisted non advised services being the growth models, with poor old simplified being left on the shelf to gather dust.

    There is a need for lower wealth, good quality advice and support for the essentials of financial planning. I am interested to see who moves next to deliver it.

    Well done FSA for delivering exactly what nobody wanted, and taking a lot of time to do it as well.

  2. Is there no one at the FSA who understands basic economics and common sense?

  3. Simplified advice was an regulatory accident waiting to happen. I had an email exchange with the consumer panel, a couple of years back, where I stated that the less well of were going to suffer from not being able to afford independent advice and the RDR would end up being discriminatory aginst them and they had the nerve to reply that simplified advice would do for them (or words to that effect). When I repled, again, I said I was appalled that they would condone poorer services for poorer people and that simplified advice was a waste of time. Needless to say they did not email back that time.
    What ever happened to CAT standard products? Why no mass take up of Stakeholder pensions?
    The people that ‘run’ this country can’t expect advisers to work for nothing and the only reall simplified product I can think of is a deposit account!

  4. You have to ask the question. “What is the point”?

  5. In the real world people make choices. In the mass market they will rarely be the choices that those in ivory towers think they should make, but then those in the ivory towers often have wider choices and more money than the majority. This does not mean that the regulators choices are more valid and er.. better than other peoples choices. The regulatory thinking is if fact conditioned by the fact that it is always dealing with ‘OPM’ (other peoples money)

  6. Is there anyone at the FSA that has ever run a business? I doubt it. I’m beginning to believe that no-one at the FSA has ever visited a business, bought something at a business, completed a business studies GCSE.

    They have absolutely no concept of business and hence make stupid regulatory decisions like this (and a good chunk of the RDR – just ask the platforms)

  7. Larry in London 29th March 2012 at 11:25 am

    @Alan. There is no point. It’s bureaucracy, pure and simple. Give a bureaucrat a pile of paper and he’ll turn it into six piles of equal height within a year.

    The only thing that will stop this nonsense will be the howls of protest from the public when they start getting bills from their IFA.

    The fundamental problem is that we have allowed government (the FSA) to control business. The FSA has taken a business model that has served the public very well for years and declared it to be unfit. But the alternative that they have proposed is the biggest source of consumer detriment ever devised — including the denial of service to millions of the less well off.

    Bureaucracy is at the helm of our ship.

    Remember the film about Douglas Bader, the WWII flying ace who lost two legs but still flew? When a guy came in with a pile of paperwork to fill in, Bader chucked it in the bin, got up on his tin legs and went off to fight the war. That’s the way to treat these potty bureaucrats at Canary Whinge.

    I think it’s time for direct action and public protests at Canary Windmills to get this thing on the public’s radar before it’s too late.

    A few placards and phone calls to journalists to get the TV cameras down there will have the mealy mouthed self-seeking bureaucrats at Canary Wee running for cover.

    Who’s in?

  8. Larry – I’m in – I think direct action is probably the only choice now.

  9. Larry in London 29th March 2012 at 12:00 pm

    OK.

    We The People……

    I hope Money Marketing will take up this as a story. Momentum is gathering….

  10. Im in too! I can’t believe that the media and consummer bodies have not jumped all over this after all it’s their segment that are being affected.

  11. Yeah…power to the people!

  12. There is the rub isn’t it.

    Simplified advice cannot be a viable alternative to suitable advice and appropriate financial planning.

    Why should a client ask for simplified advice in the first place, especially if it relates to the planning of Life Assurance, Pension / Income in Retirement or Income Protection and investments .

    The only way a simplified advice service could have ever worked is if the client specified quite clearly that the only advice they required was on a specific subject and that the adviser was not obligated to consider the effects of any transaction / investment / protection plan on other areas such as tax liabilities etc.

    Financial Planning in all areas is not a simple process, it is very involved, takes a great deal of an advisers time to get to the stage where an advice solution to a particular area / problem can be constructed.

    Clearly the FSA has no idea how to make this work and any firm that tries to set up a simplified advice service is going to rue the day, especially when the complaints come in, as they inevitably will.

    Any IFA worth their corn will avoid even considering this type of service, it is against everything the RDR was ostensibly set up to do, better consumer outcomes can only be obtained by ensuring that any advice or service given is not skewed by a lack of pertinent information about the clients circumstances which may have an influence on any recommendation or product purchase.

    There is an appropriate northcountry phrase for these people, which I am too polite to put into actual words, but it involves a process of flinging objects without any thought as to where the land.

  13. …but this is exactly what the FSA wanted or rather has never wanted. They went out of their way to wreck Sandler products by insisting on an advice process that was very close to that of IFA’s and they have done the same here. They simply don’t want to have to regulate a mass market.

  14. So, “Larry in London”, “Anonymous” and “Soren Lorenson”(who of course, is ‘Lola’s Invisible Friend’) are all now fully joined up to a Direct Action Group. The FSA will be quaking in their ivory towers.

    Meantime, Mr Naylor has made his 1,000 posting about…his dislike of RDR!!

    Just bring on 31st December…I can’t stand any more whinging!

  15. Hi IFA@2:22pm

    It’s good to find someone else on here with an appreciation of literature aimed at the under 5’s.

    Soren.

  16. Those that gave us simplified advice have taken it away. At best it was a fig leaf to protect the FSA from allegations that they were making the delivery of quality financial advice too expensive for a huge part of the population, so what will replace that fig leaf? Surely not the banks again?

  17. So, quoting the FSA “The aim of this guidance is to reduce any perceived regulatory uncertainties that may be discouraging firms from offering simplified advice services.”
    Instead, we will simply discourage them by making it pointless – if you need all the facts and the same reg’s to offer simpler advice, then it’s not simpler, is it?

    Always a joy to read the comments on here though – especially some of the nome de plume’s – it’s like listening to the 2 old guys on the balcony in the Muppet Show sometimes!!

  18. To Larry in London.

    If you organise, many will join. Somebody has to tell the public what is about to happen. Direct action is the only action that works these days.

  19. Hmmmm, What about NEST ???

  20. Arrogant half-wits run the FSA. But why should we be surprised when we have 650 MPs most of whom are also arrogant half-wits.

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