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FSA sounds note of warning on execution-only

The FSA has raised concerns about advice firms moving into the execution-only market, saying it fears some may not properly implement its disclosure requirements.

At The Platforum adviser roadshow in Birmingham last week, Aegon head of platform sales Martin Coyle said: “Advisers should be looking to offer execution-only services so they can have a better sense of their client’s overall financial situation and can therefore understand the client better.”

But FSA technical specialist Rory Percival said adviser firms offering execution-only functionality for the first time should ensure they are undertaking the correct disclosure to clients.

Percival said: “The obvious concern would be if firms are new to providing execution-only. There are quite specific rules on disclosure.

Are they adequately undertaking appropriate disclosure that is clear to customers? In a non-advised sale, there is no suitability protection, so it is imperative that clients get the right information. We would be interested in how firms are disclosing these services.”

Cofunds and Fidelity both offer execution-only, white-labelled services while Nucleus and Ascentric say they are planning to launch similar offerings.

Thomas and Thomas Financial Services managing director Darren Lloyd Thomas says: “I think this sector is quite a high-risk area and adviser firms who enter into this could end up getting their fingers burned if they are not careful.”

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Comments

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  1. I think the FSA are spot on to raise this.

    There’s nothing wrong with execution only business where the client is genuinely ‘buying’ a product/solution and doesn’t need or want advice.

    The concern I have, however, is where a client thinks they are getting advice when they are, in fact, being dealt with on an execution only basis.

    A clear disclosure is crucial for the client to understand exactly what responsibility the Financial Adviser has and whether advice in actually being given.

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