IFA Centre managing director Gill Cardy is calling on FCA chief executive Martin Wheatley to act over his concerns about an advice gap and create a simplified regime.
Speaking at the Treasury select committee earlier this month, Wheatley said he had “concerns” over the mass withdrawal of bank advice after the RDR and an advice gap developing for lower earners.IFA Centre managing director Gill Cardy is calling on FCA chief executive Martin Wheatley to act over his concerns about an advice gap and create a simplified regime.
Wheatley said advisers have to do up to six hours work before advising clients and raised concerns about the advice available for those with portfolios worth less than £100,000.
Speaking at a recent Institute of Chartered Accountants for England and Wales wealth management conference in London, Cardy said the regulator needs to do more to help those on lower incomes.
She said: “There needs to be a mechanism where people who don’t need full advice get some advice cost-effectively without a six hour compliance framework just to help somebody with what may be very basic guidance about building their financial futures.
“Everything the FCA does assumes clients already come to us with everything sorted including assets, income, businesses and shareholdings.
“The system is predicated on sorting out someone who is already there but it needs a proper mechanism, potentially with light touch regulation, to get them on the way from say age 25 to 30 and get the assets. The advice focus is not right at the moment.”
Industry consultant Peter Williams, who has campaigned for simplified advice, says: “The FCA has to listen to the industry and have greater flexibility. It can definitely make it easier to do business which would help.”
This is not a case of simplified advice this is a case of simplifying paperwork, the present system of demonstrating what has been said and done is the problem not the basic advice process.
The old FSA was so concentrated on advisers covering their backs with extensive reports, KFD and illustrations that somewhere along the line we lost the principle of giving basic advice. This is now made even more complicated with claims management firms taking advisers to FOS because they’ve missed a paragraph in a letter or supposedly didn’t explain attitude to risk.
I’m all for treating clients fairly but a degree of common sense needs to be reintroduced back into financial services. Simplified products or so-called simplified advice is a total red herring what is needed is simplified paperwork with high quality financial advice at the heart of financial services. I also firmly believe that the regulator needs to act on execution only providers that pretend to give advice through so-called decision trees (if this is what is meant by simplified regime I won’t be supporting it).
Who pays to compensation when these so-called systems go wrong answer us IFA that are left!
Costs are not only based on the paperwork done it is also based on the liability the fact that IFA’s can be sued 20/30 years later may explain the reasons why charges remain high.
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We do not need two separate systems in place i.e. simplified advice or full advice. I imagine that 5 minutes after that happened you would have the first claim against a firm from a client who claims to think they were choosing the full advice option when in actual fact they have the simplified advice option. The CMC’s would be all over that.
Instead we need one system that makes it easier for advisers to advise everyone. Clients should be able to get advice about investing within, for example, a stocks & shares ISA’s without it a – costing a small fortune, or b – taking forever.
The FCA has lost track of the fact that 90% of the time clients only want to know what the basic risks are when investing. They don’t want a 15 page suitability report or a 2 hour appointment to explain the worst case scenarios.
The standard approach to advice should be the so called ‘simplified’ advice route unless clients circumstances dictate otherwise such as ultra-HNW clients.
All the above is my humble opinion only, feel free to disagree.
Nick Wardle
I would totally agree with all of the points you have raised and maybe it’s has come time for the FCA to realise that normal consumers do not read half the information we provide them with.
Whatever happened to the principle of providing clients with reasonable amounts of information that was clear and concise?
The present system does not protect clients it protects advisers and that the whole problem with the scheme. We can talk all we want about advice gap and reasonable charges but at present the whole system is run on the premise of protecting advisers from being sued.
That is the present madness of financial services until that basic point is addressed politicians and regulators need to stop moaning about costs.
It’s like Steve Webb of the pension regulator turning around and saying that advisers need to give advice on occupational pension schemes but hang on not charge for it! Does that effectively mean that the government is going to underwrite all of the potential complaints that could be generated by that advice, I doubt it! When will politicians and regulators realise that advisers are not only earning money to sustain their practices they are also building large liabilities.