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FSA refuses to lower simplified advice qualifications

The FSA says that simplified advice will have to comply with adviser charging rules after the RDR is introduced and advisers offering a personal recommendation will have to be qualified to QCF level four.

The regulator published its long-awaited guidance consultation on simplified advice this morning.

It outlines that personal recommendations to buy a retail investment product given through a simplified advice process will have to be paid for through adviser charging and advisers will need to be qualified to QCF level four.

The FSA sets out three options under which firms can consider to support a simplified advice service.

These are that simplified advice is provided wholly through an automated system, that a QCF level four qualified adviser is on hand to answer client questions as they go through the process, or that the client has access to someone who can answer questions factually without giving a personal recommendation.

The FSA says that if firms opt for a fully automated simplified advice system the design of the system is likely to be more complex than procedures for face-to-face advice, and says it would expect a fully qualified retail investment adviser to be involved in the design process from the start.

Firms giving personal recommendations through simplified advice have to be QCF level four qualified, maintain the minimum 35 hours of continued professional development per year, and hold a Statement of Professional Standing.

Firms not giving personal recommendations will have to ensure they have the right systems and controls in place to avoid individuals straying into regulated advice. The regulator considers it will be “particularly difficult” for firms to manage the risk that an individual giving factual information will not inadvertently give advice.

In the run-up to the guidance consultation being published, the Association of British Insurers and the British Bankers’ Association called for simplified advice to be subject to lower qualification requirements than under the RDR.

The FSA says: “We have asked for detailed information on the specifics of the advice process and the role of the individual which would justify a lower qualification requirement. But we have not been convinced of the need for, or desirability of, a partially qualified or less competent adviser to give personal recommendations to retail customers through a simplified advice process.”

The FSA considers simplified advice to be a form of restricted advice. This will mean that firms offering simplified advice will have to disclose in writing that its advice is restricted, so that clients will understand the limitations of the service.

It says that it is not up to the FSA to decide what products should be available through a simplified advice process, despite industry calls for it to do so.

The FSA says that demand for simplified advice may be impacted by the role of the Money Advice Service, as consumers who make use of the MAS might be more likely to access regulated financial advice in future. It adds the introduction of auto-enrolment may also see more consumers start to address their retirement savings needs.

On complaints about advice received through a simplified advice system, the regulator cites the Financial Ombudsman Service’s approach to complaints about advice received through the simplified advice process, taken from the FOS website.

The FOS says it will judge simplified advice complaints on the same principles as full advice, including whether advice was suitable or not. It would not expect a full fact-finding exercise to be carried out.

The FOS adds that where simplified advice involves an automated process, the FOS would look at whether there was a “good record of the information the customer gave and the choices they made”.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. idiots – if this is their view then it will never work

  2. Gosh, this is good!

    Thats simplified advice sorted then.

    The regulator considers it will be “particularly difficult” for firms to manage the risk that an individual giving factual information will not inadvertently give advice.

    Im a strugling with this one. What other information should we give the client if it is not factual.

    I will consider the answer to that when i have finished splitting an atom.

    In the meantime we are in the laboritory perfecting our ” automated simplified advice system” The design of the system is more complex than procedures for face-to-face advice but we have assigned all of our capital adequacy to this vital process. Initial test on a random selection of orangutans are encouraging. Full report and design blue prints are featured in the October Lancet.

    Quote from above. “The FSA considers simplified advice to be a form of restricted advice.”

    Surely this should be restricted advice is a form of simplified advice!

    Maybe in the interest of consumer understading should we not introduce the concept of :-

    “Restrictified non factual information” which must not be confused with “Simplystricted advice”.

    Just a thought.

  3. And so, even more members of the public are going to be disadvantaged as a result of regulatory ineptitude.

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