Director general Chris Cummings says firms would continue to offer full financial advice but where a client has a specific need, such as investing a big lump sum, the adviser could focus on this to the exclusion of other areas.A disclaimer would be signed by both parties making it clear what is and is not in the scope of the advice. Cummings says the client could go on to ask for advice in other areas but it would be at their request rather than the adviser’s decision. Personal Finance Society public affairs director John Ellis says the proposal is an interesting idea to throw into the debate, with the FSA in the middle of its quality of advice review, although he warns it will be difficult territory to lobby on after the recent bruising advisers received from the FSA mystery-shopping exercise and the Which? research which uncovered bad practice in the industry. Ellis says the idea certainly fits in with the hierarchy of advice that the PFS would like to see introduced and could clear up confusion in the space between no advice and full advice. But he says it could be “a pretty murky area” and safeguards would be needed to stop advisers potentially using it to press clients into further advice without proper disclosure. FSA Solutions director Norman Cochrane says there are specific areas where limited advice would be useful but also warns of potential pitfalls. He says for low-level pension plans and monthly savings products, the proposal could bring benefits to the adviser and consumer in terms of cutting red tape. But he says in areas such as lump-sum investment there could be detrimental effects across the entire financial planning arena and advisers would have to be careful the move does not create new misselling risks. “I could see this proposal being very useful in making the advice process more cost-effective to the adviser and consumer for certain products but there are misselling pitfalls here that advisers would have to be wary of. Advisers should not be able to use such a regime as a way of hiding from their responsibilities,” says Cochrane. As well as the FSA conducting a quality of advice review, it will also tackle the issue of advice when it consults on updating its Cob sourcebook and the disclosure regime to take account of Mifid in the coming months. Cochrane says simplification of the menu is high on the FSA’s agenda and it is likely to give consideration to proposals that can streamline the advice process as long as concerns about consumer protection can be allayed. Institute of Financial Planning chief executive Nick Cann agrees in principle with Aifa’s call for a simpler, robust process for certain clients as a way allowing more people to access financial advice and reduce the regulatory burden. He says there are elements of regulatory requirements that are unnecessary and can be rolled back. But Cann says there is a danger of the adviser not getting a full understanding of a client’s situation by focusing on one area and impeding the ability to give best advice. Baker Tilly Financial Services regional director Steve Osbiston says the firm would find Aifa’s proposal very useful in improving the advice process and bringing in extra revenue. Osbiston says: “This idea of limited advice would be a tremendous help to us. For many client needs, a full fact-find is not required and this is a huge barrier to us being able to service them as the costs are prohibitive.” He says limited advice would make it worthwhile for Baker Tilly to advise a greater range of clients and allow access to the firm’s expertise for people who are currently excluded from independent advice . He says firms are being driven by a regulator that has implemented huge swathes of requirements across the industry when on many occasions these regulations should be localised or removed. But Pharon director Nicholas O’She says the Aifa proposal takes a narrow view of the advice process and could result in clients being sold inappropriate products. He says: “If you are a mechanic, you do not just look at one tyre on the car and the same principle applies here. It would be worrying if products were allowed to be sold in isolation by the adviser without thought for the rest of the client’s financial planning needs.” Aifa’s idea comes on the back of a Tory proposal to include a clear disclaimer in the advice process for some higher-risk products where the advice would not take on future liability for any misselling claim. Tory MP John Redwood says the party is looking for sensible proposals to increase the degree of caveat emptor in the market and believes such a move would allow more people access to advice.
Skipton Building Society
Flexible 10 Year Fixed Rate Mortgage
The news that Tony Blair is committed to leaving office next year will be viewed by many as a sign that a new beginning is on the way. A New, New Labour if you like.
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