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Networks push for FCA simplified advice talks

Advice firms are pushing the FCA to revisit the idea of a workable simplified advice model to help close the post-RDR advice gap.

Networks say the FCA needs to return to the negotiating table as they have gone as far as they can in developing simplified advice models but cannot commit further investment without regulatory approval.

Lighthouse chief executive Malcolm Streatfield says: “There is demand for a simplified advice model and there are companies that would like to do it. The FCA should be getting interested parties round the table to help us find a solution.”

Streatfield advocates a “guided advice” model where a customer completes a scripted set of questions, supported by a telephone call with an adviser. Consumers would be responsible for the investment decision.

Gordon McNeill

On-Line Partnership is piloting an online system which it says has potential to reduce research time to an hour per client.

Joint deputy chief executive Gordon McNeill says: “We have considered a centralised whole of market research tool for simple investments. Depending on clients’ answers, the tool would generate a list of products which the adviser could discuss with the client. We would be keen to put that to the regulator.”

McNeill adds the network would be prepared to take on the liability for the advice because the tool would vet the investment options.

Consultant Peter Williams has previously led calls for a “basic advice plus” regime.

He says: “What the networks are suggesting is something similar to what the banks were looking at two to three years ago. But at the time the FSA was not keen on anything which could disrupt the RDR.

“With the transition to the FCA, the regulator is now in listening mode and I would encourage networks to approach them for a discussion.”

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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Simplified advice is not the answer. The regulator just needs to make it simpler to give the level of advice we currently do.

  2. I am a strong advocate of a streamlined (rather than merely simplified) advice model (Proposition, Costs, Risks and Tax). However, I think it’ll be difficult to persuade the regulator to embrace the idea of consumers being handed responsibility for the investment decision, as this would mean advisers being able to absolve themselves of responsibility for suitability. Suitability is one of the foundation stones of regulation and an unscrupulous but skilled intermediary could perhaps slant his presentation in such a way as to steer the customer towards making a wrong decision. That would be a backward not forward step and I can’t see how it could ever fly.

    That said, intermediaries (of any stripe) most certainly do need to be relieved of the burden of having to explain and compare in copious and largely unnecessary detail every possibly suitable product and product type available. As an independent (I’ve just gone restricted in certain areas), our network (and probably others) insist that even for small top-ups to large portfolios of long standing held via a platform, we have to undertake a completely new funds-specific platform comparison to establish that the existing platform is “still the most suitable one”. This, as far as I’m concerned, is compliance gone mad.

    Consumers simply aren’t interested in ploughing through reams of guff explaining why a VCT or an EIS or even an Investment Bond is less suitable than, for example, an ISA or, if they’re resolutely risk-averse, why an ISA is less suitable than a high interest Cash-based product. And, even if they have the means to do so, most consumers certainly don’t want to have to pay for all the work involved in putting it all together.

    Still, we may perhaps draw some encouragement from Martin Wheatley’s recent statement that the advice process should be predicated primarily on ethics rather than a slavish adherence to ticking 50 compliance boxes. Clearly, advisers, particularly those who are members of networks, are stuck in an overly bureaucratic and excessively burdensome log-jam of compliance. Martin Wheatley appears to understand that this state of affairs needs urgently to be addressed, so we’ll just have to wait and see if he’s prepared to allow his words to be translated into a positive and constructive change in regulatory policy.

  3. Malcolm and I seem to be of the same school of thought – maybe not surprising as we went to the same school

    I have written elsewhere about the so-called customer detriment resulting from RDR. It is a serious issue but one that could be easily put right

    Many clients would benefit from a service that fits between no-advice and full advice – the later is often seen as complex and expensive

    There now seems to be a strong case for the FCA to back to school and come up with a better solution for the middle classes

  4. What about the Financial Ombudsman? Clients will still have a right to go to the ombudsman if you get it wrong. What is the point of training advisers to diploma level then going through a simplified route that could leave gaps where the client can come back to bite you? This has been the bane of ‘basic advice’ and reason why firms rejected it as an option. You have all the risks and none of the safeguards. I am not sure why advisers would want to expose themselves in this way.

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