View more on these topics

IFP attacks FSA’s ‘outrageous sweeping statements’ on simplified advice


The Institute of Financial Planning has hit out at the regulator’s “outrageous sweeping statements” about who should access simplified advice and questioned whether the regime will be profitable for firms.

In its simplified advice guidance consultation, published last week, the FSA says firms should not recommend retail investment products through simplified advice if a client has basic protection needs that are not being met, would be better off paying down debt or does not have access to adequate emergency savings.

IFP chief executive Nick Cann says there will be people who want to save or invest for the future before they pay down existing debt.

He says: “Many people who have what I would call ordinary debt want to try and save for the future or invest in different things. To say those people should not do that shows we are not really engaging with the customer.

“It is outrageous to make sweeping statements about how people should set themselves different goals and objectives.”

Cann believes that as simplified advice will carry the same compliance costs as full advice for providing documents such as fact-finds and suitability letters, simplified advice will offer little profit margin.

He says: “What the FSA is saying is it has come up with a suggestion. The difficulty is that under the current regulatory rules, the suggestion means a business cannot deliver that sort of service to make any money.”

Thameside Wealth director Tom Kean says: “This guidance adds more confusion to an already confused marketplace. Simplified advice sounds like it is anything but simple.”


News and expert analysis straight to your inbox

Sign up


There are 18 comments at the moment, we would love to hear your opinion too.

  1. Now that “Simplified Advice” is effectively dead perhaps we can move on to “Simplified Sales” ?

    No fact find, No Qualifications, No FOS liability equal to full advice BUT rather Regulated Products which can be SOLD at a reasonable price and make a profit for all concerned.

    It is not advice but it is what the vast majority of the public need and can afford.

  2. I didn’t find the FSA’s simplified advice paper particularly surprising, as it did little to differentiate supposed simplified advice from the current limited/focused set of rules that a firm can use now.

    The IFP comments are correct that it will carry similar costs and controls and therefore the simplified rules on their own won’t provide the ‘magic bullet’ profitable solution that many were hoping for to serve the middle market. Any proposition must have ‘something else’ that makes it work.

    Having read the paper, I cannot decide whether the FSA are ‘suggesting’ the process addresses debt, emergency funds and protection or whether they are ‘insisting’ the process ‘must’ address it BEFORE they are allowed to invest. I fear the latter.

    I think it is fair comment to suggest that a client should at least consider reducing debt, etc., but a bit ‘Big Brother’ if they won’t let you after discounting that decision for some reason.

    As the paper is entitled ‘guidance consultation’ they are STILL not defining a final rule set.

  3. @John Blackmore

    You can do that now under the current rules as execution only. helping a client realise they have a need, what options are available and then providing some support for an educated choice is (in my opinion) the challenge to address.

  4. Based on the FSA’s skewed logic then, simplified advice as to whether to repay debt/arrange protection or to enter the employer’s “NEST” pensions scheme would be to forgo the mandatory employer contribution (which they will not get in pay instead). Now I might agree that if they have borrowing with high interest rates and NO protection, that makes sense, but if they have SOME protection and borrowing on reasonable interest rates (say under 6%), are the FSA telling us the simple advice would be to decline to enter the employer’s pensions scheme?
    So much for simple advice….

  5. Let s face it the FSA make it up as they go along MPPI FSAVCs low cost endowments they were all simple products .THe FSA just want to restock the water for the future so they can continue to pick on the little fish when they have made sales on these new products which will be non cost effective no flexibility and no point in selling .Cheap is not for everone or do the FSA all drive KAs.
    Maybe they should look at the debt they have caused and stop harrassing people making it imposssible to make a living.

  6. Have you ever taken simplified advice?

    Has the investment you were advised to buy consistently returned a greater amount than the interest rates you have since been charged on the overdraft and credit cards which you were never advised to repay.

    If not, on a no win, no fee basis, please just join the queue.

  7. This is what happens when Regulators, without any qualifications for the task they have taken upon themselves, or any responsibility for their actions, attempt to change a whole (and previously successful) industry instead of concentrating on eliminating rogues and frauds.

  8. Bottom line to all you advisers, direct providers, limited service providers. online providers, telephone providers, Goverment bodies concerened about savings pensions and protection black holes. FINANCIAL PRODUCTS HAVE TO BE SOLD THEY ARE NOT BOUGHT.

  9. It’s advice, but not as we know it, Jim. Beam me up (away from all this) Scotty !

    With apologies to…….

  10. As much as I fully support professional ethical standards, with a fee practise and 30 years in the industry, I have to concure with Anon comments that this business is rarely bought and people still have to be sold too. The ironic thing is all the cascading wealth that is now managed by IFAs wealth management firms, or whatever they like to be called, has historically come from advised sales from home service to direct sales companies.This off course is all to easy to forget but if you do your research there were in fact very few IFAs or wealth managers about 30+ years ago.Long live the professionally qualified “sales” professional.

  11. Why not simply upload all the client info to the fsa, they can then send us a quick email telling us what we can and cannot recommend to the client. That way the client has no need to complain about us, will be wasting their time complaining about the fat controller, sorry I mean regulator. Then there will be no consumer detriment
    no need for FOS FSCS PI insurance etc. Happy Days when our beloved leaders with all their collective intellectual failure is in charge.

  12. @John Blackmore & @ Jean Dean

    Truly scary that you both think that it’s okay to sell products with no fact find or recommendation. I thought that those bad old days had gone forever and if people are using execution only as a way of selling products without the necessary paperwork then I support the European Union’s attempt to ban execution only !!

    Simplified advice is a really bad idea and I hope that the regulator see sense to do away with this initiative.

  13. The FSA have interfered in this area to the detriment of everyone, including consumers. But the problem is they have left the waters cloudy and the situation vague, offering no guidance to anyone.
    In general, the FSA’s vision of simplified advice cannot work. It is not profitable for firms to provide and carries unbalanced regulatory risk. This is a spillover from what they envisioned under the new RDR regime and, as a previous commentator mentioned, most of the regulatory staff do not possess financial services qualifications or experience (certainly not at L4).

  14. To quote Dragon’s Den- I’M OUT!!!

  15. “ordinary debt”?? Is this an “outrageous sweeping statement”

    Is this in your syllabus? Does it contribute to the ‘points mean prizes’ Diploma?

    Scary stuff.

    Reason why letter:

    Dear Mr Bloggs

    I recommend that you keep your ordinary debt at 39.9% and invest all your spare cash in an investment that can go down as well as up.

  16. We live in an age of unprecedentedly complicated taxation and pensions structures, allied to dumbed-down protection products available either online or via supermarkets at prices with the advice margin stripped out. Increasingly, I find clients taking the benefit of my advice on a suitable protection package and proceeding with my recommendations but, after just a few months, getting the same package elsewhere for a few quid less and cancelling what they’ve done through us. I imagine many other intermediaries are finding the same. Recovering costs from such people is difficult because it’s easy for them to claim financial hardship and omit any mention of the alternative products they’ve effected elsewhere. How do you prove in a court of law in this day and age that the clients aren’t lying through their teeth?

    For its part, the FSA has created a consumer redress environment that makes it easy and free to complain about past advice, with advisers vulnerable to attack for the rest of their lives. The FSA itself is able to wriggle out of responsibility for its own failings and oversights by way of the handy tool of regulation by hindsight.

    For decades, the banks have operated on the basis of simplified advice, or something very close to it, and all the data tells us that it doesn’t work. The FSA refuses to admit this, insisting that somehow or other the circle can be squared. It can’t be.

    Personally, I dislike execution-only business because the scenario is almost always that of a client with a bit of knowledge in one narrow area saying to me I’ve done my own research, I know what I want to do and I just want to use your agency to effect the transaction (on minimum commission). For me, that almost always raises a list of What about….? questions and I feel uncomfortably straitjacketed from the word go. In virtally all such situations, I turn such people away. (Best execution is another matter.)

    In reality, simplified advice is an aspirational sound-bite that will be found either to be unworkable in practice. Most, if not all, practitioners will wisely shun it. I, for one, see nothing in it for me. My services are based on the provision of full advice, Mr Client, and you can either pay for that or go elsewhere.

  17. peter/julian..

    what is a good idea then? going around to the same customers every two years and churning their monies for a fee?? like you already do…

  18. julian, the reality is mr customer will go elsewhere and any ifa who thinks different is fooling themselves… roll on 2013 when we can put a stop to it all..

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm