The FSA says it does not understand why firms cannot offer clients free simple advice services after the RDR.
Speaking at a Personal Finance Society RDR seminar in London last week, FSA head of investment intermediaries Linda Woodall (pictured) said: “Some advisers have told us they currently offer free services to clients with simpler needs but they will not be able to do this going forward. I would ask, why not? If they have been able to maintain a profit now without charging, why would that necessarily be any different in an RDR world?”
The FSA published a guidance consultation on simplified advice last month. It outlined that personal recommendations to buy a retail investment product through a simplified advice process would have to be paid for through adviser-charging, with advisers qualified to QCF level four.
When questioned by Money Marketing on how free simplified advice sits with promoting the value of advice and how advisers could offer this profitably, given that qualifications and liabilities are the same as full advice, Woodall said: “What I would suggest is that there would be a degree of cross-subsidy in particular businesses currently offering simplified advice for free.
“The level of services and the degree of cross-subsidisation is a matter for firms to decide in accordance with the design of their business model.”
Plan Money director Peter Chadborn says: “I know there is nothing stopping us from offering free advice but I was under the impression the one thing we could not do was cross-subsidise. What the FSA is saying seems to be a bit contradictory.”
An FSA spokesman declined to comment.