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Not so simple: FCA fails to deliver on simplified advice

The FCA’s long-awaited guidance on simplified advice fails to create the clarity needed for firms to develop simplified advice models, experts warn.

Last week, the regulator published the findings of its thematic review into simplified advice and non-advised sales, alongside a guidance consultation which aims to clarify the boundaries of simplified advice.

The paper defines five different types of advice models: execution-only, execution-only for complex products, simplified advice, limited or focused advice and full advice.

But experts say the FCA’s intervention fails to address the way the Financial Ombudsman Service treats complaints and the financial viability of simplified advice models – the biggest barriers preventing firms from developing simplified advice offerings. 

FOS concerns

Apfa director general Chris Hannant says: “The paper defines a range of technical distinctions but the big question remains: if a firm develops a simplified advice model, what happens when they end up at the FOS with a client who claims they received full advice?

“It does not alter the underlying concern that firms will be held to a different standard than the FOS claims – that is the barrier I hear from firms over and over again.”

The FCA says it is aware of this concern and the FOS should treat complaints about simplified and limited or focused advice in a way that “recognises the nature of the service”.

But it goes on to quote the FOS website which says it already judges the appropriateness of simplified or basic advice “in the specific context in which it was given”.

Hannant says: “The message from the FCA is to trust the FOS to do what it says it will but the problem is the experience of firms is often very different to what the FOS says.”

4 Pump Court barrister Peter Hamilton adds: “What the paper says about the FOS is not very helpful. The FOS will continue to apply its fair and reasonable test to each individual case.”

Viable models

The paper proposes to keep the QCF level 4 requirement and suitability rules for simplified advice and limited advice.

It says the suitability requirement applies to all personal recommendations, no matter how they are delivered.

However, the regulator says: “It is important to note the suitability requirement is flexible and allows firms to develop a simplified process dependent on the product and type of customer for which it is intended.”

The paper says the information a firm must obtain will vary from case to case and that the more complex and high risk the product, the higher the threshold.

But Pinsent Masons legal director Tobin Ashby says this does not give firms enough clarity.

He says: “One of the major perceived problems with simplified advice has been the requirements around suitability and compliance are the same as for full advice.

“The FCA is at least now saying it is not expecting suitability standards to be the same as for full advice but it is very much focusing on subjectivity. 

“Therefore, it will be difficult for firms to set their own boundaries and assess the level of risk they are taking on.”

The paper discusses a number of issues which have been raised by firms as barriers to developing simplified advice propositions.

These include whether a customer who believes they have received advice would be treated by the FCA and FOS as having received full advice.

It says while the investor’s perception of the service “is very important”, it is feasible the customer could be wrong.

When outlining limited and focused advice, the FCA says this would involve a customer approaching a firm with a specific objective, for instance, to find out what they should do with their existing with-profits policy.

It says the firm would need to explain to the customer their other financial needs will not be addressed.

But the regulator says a “duty of care” remains. This means if an adviser realises the customer has a family and no protection policy, they would be expected to highlight that need to the customer.

EY financial services senior adviser Malcolm Kerr says the paper “raises as many questions as it answers”.

He says: “It does not help firms develop anything that is really compelling for the consumer.

“It does not take any of the costs out of the process. Why would an adviser want to give focused advice? It will be almost as costly, is only giving the client part of their service, and is still likely to uncover other issues outside of that specific area.”

Independent compliance consultant Adam Samuel says: “This paper adds nothing and it solves nothing. It is really only collating the existing rules in one place.”

The paper also confirms that firms offering a simplified advice service cannot call themselves independent, which experts say may act as a further disincentive.

Ashby says: “This is a clarification but I am not sure it is a welcome one. There will be advisers who feel they could still be independent while advising in a more focused way.”


In its thematic review findings, the FCA warns non-advised brokers using investment ‘best buy’ lists risk misleading customers if they fail to properly disclose the research into the products.

The consultation also warns non-advised firms who use information to “influence” or “persuade” customers risk straying into regulated advice.

It says while information does not generally constitute advice, it can do so if it is provided on a selected basis.

Kerr says he is disappointed the FCA has not given firms more flexibility on the distinction between advice and information.

He says: “I had hoped the consultation would make greater reference to the guidance guarantee announced in the Budget.

“I would like to see a completely new model which is linked to guidance and allows firms to do more without straying into full advice.

“There is a good chance that simplified advice will now be overtaken by guidance – this paper could be the nail in the coffin for simplified advice.”

Some experts have even suggested the FCA’s guidelines will see Chancellor George Osborne’s guidance guarantee – and those who deliver it – become regulated.

Hargreaves Lansdown head of pensions research Tom McPhail says: “The FCA’s papers pose some fundamental questions regarding how TPAS and the MAS might be able to deliver the guidance guarantee promised in the Budget, given that this guidance now seems to fall within the FCA’s definition of regulated advisory activities.”

Adviser views


Tom Kean, director, Thameside Financial Planning

This guidance is hopeless and the industry will not be able to work with it with any confidence. The FCA needs to go to the coalface and see the realities of trying to set up one of these models before it can provide anything helpful. We need more prescriptive guidance.

Page-Tim-Page Russell-2014-500x320.jpg

Tim Page, director, Page Russell

By telling firms that they have a duty of care to look at other areas when providing focused advice, the FCA is saying that firms are still open to the risk of the FOS widening the scope of the advice retrospectively. This will reduce the appetite of firms, particularly independent ones, to get involved in simplified or focused advice.

Expert view


The FCA says this consultation aims to help firms understand how all the various pieces of legislation on the line between execution- only and advice fit together. It sets out the existing rules on what is and is not a personal recommendation, including past FSA guidance on simplified advice and the definition of investment advice in the EU’s markets in financial instruments directive.

The FCA says this will help firms better understand the options for simplified advice but it was utterly confusing. All it showed was that between them, the European and UK authorities have created a hopelessly complex situation. And that complexity itself is enough to blind the market. Forget the idea that consumers are fed up with the industry and do not want to engage with simplified advice – it is such a horrible regulatory landscape that the industry has no confidence in operating in it.

This paper does not go far enough. You will not find a single distributor firm that says: “This is what I have been waiting for, I can go ahead and hire people and take advantages of the opportunities in this market.”

I would like to see independent advisers being able to offer a simplified service – that they cannot just shows the independence rules are too
onerous and the market will be worse off for it. What the market truly needs is more simplicity. I would like to see the Cobs rules pruned back to the essentials. Only when there is greater simplicity of UK and European rules will simplified advice be able to find a way forward.

Richard Hobbs is an independent regulatory consultant


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Is there anything, anything at all that this regulator or any of its previous benighted incarnations has achieved that can be hailed as a success in terms of being beneficial for consumers and the provision of advice?

  2. As the Board of Directors at the FOS are selected and appointed by the FCA, you would hope that, as an industry, we wouldn’t have too many problems with ‘left-field’ decisions from the Ombudsman about ANY sort of advice – simplified or otherwise. Alas, this is quite clearly not the case and leads one to ask the question; “is this regulation by the back door?”. It is certainly an easy way for the FCA to apply unpopular, difficult and perhaps even unwarranted, changes to the rules and regulations without actually changing the rules and regulations. Remember; the FOS must consider any “guidance” that is, or was, in circulation at the time of an alleged transgression – I see dead people!!!!

  3. Seems the “simplified advice” dog, after years of tail chasing, has finally disappeared somewhere imponderable……..

  4. Given the FCA are unable or unwilling to get involved in planning for Independent Financial Advice – and their desire and the application of restrictions to TRADE – to force the remaining adviser down the RESTRICTED ROUTE – of a Tied Agent – or simplified Advice by Employers and MAS (Money “Advice ” service ) – where the poor advice on offer is neither sustainable or accurate – but is ” Simplified Advice “, by people who do not want to be advisers – like those poor sods ( employees ) of Banks – forced to flog products – to anyone and everyone – without qualifications – or interest – whilst Martin Wheatley slags off Independent Advisers – form his tower of ivory . . . . and his desire to drive ” Advice “, once he has instructed advisers to GAIN a Level Four Qualification ( or above ) – he reduces the opportunities to build ANY SUSTAINABLE BUSINESS . There is only one thing which is clear form the FCA – they do not know one part of their anatomy form another ( especially in the A & E department ).
    I wonder what would need to happen to have Qualified members of the FCA – as a regulator – rather than an intimidator . Still given the drift of Independent Advisers . . . . .I wonder when Mr Wheatley will confirm numbers ( they must have settled down now – probably settled down somewhere eels ) of remaining advisers ? Interesting that Standard Life are purchasing other companies – so that Competition is Reduced as it was with LLoydsTSB and Robbing Bank of Scotland – with the banking services ( did I really say ” services ” ) – with consumers . . . . . held to ransom in Edinburgh – known as the Edinburgh Stinge ( a dirty word for miserly mean miserable – the verb to be ” stingy ” – selfish self centred . . . . . . It is not difficult to see why FCA has failed. They have no direction and other than an objective to destroy Independent Financial Advice – and backed by Standard Life and Scottish Widows ( insurance companies who have failed their policyholders – with high charges which are not transparent – and their continuous desire to churn policyholders ( watch out for churning in Auto Enrolment ) – but their business models – not sustainable – but Martin Wheatley has not noticed this yet ? or is being instructed by MPs who have been targetted – to destroy Independent Financial Advice – by whatever means necessary – I refer to this ( as I did with the Chairman and Directors of Male dominated Scottish Widows ) . . .as ” The incompetent leading the Incontinent “, and the ” wee” poor souls who have to implement Captain Cameron’s Government policy ! We’re Dooomed Captain Cameron . . .Doooomed !

  5. ” SIMPLIFIED ADVICE “, Does one need a Level Qualification to provide ” Simplified Advice ?” or is it just after charging- and ALL the COSTS associated to . . . ALL IFA’s to pass a ” level Four Qualification “, obtain Certificates . . . .to be able to remain in business ISA qualifications – That any old sod ( whether in MAS or as an Employer ) can FLOG ADVICE ? No framework required No FCA to badger bully . . . . and humiliate Advisers – That sounds like it was when I entered the ” industry of insurance ” – with Direct Sales known as Tied Agents ( now called restricted advisers ) and ” Insurance Brokers ” who could offer products and services form the whole of the market . . . . .Now they are called Independent Financial advisers. With RDR comes insolvency in insurance companies – the loss of confidence as a result of Breaches of Trust by insurance companies has ensured consumers cannot trust any insurance company – which is reflected in the loss of business ( and drop in share price ). Thye have withdrawn service ot Brokers and IFA’s – they have terminated new products – a result of bean counting, SLOTH and incompetence – preferring to wait on some other company spending the money – and copying the product on the cheap ). The failure of the FCA to regulate – and the undermining of advisers by Mr Wheatley and insurance companies . . .which means advisers have NO CONFIDENCE IN INSURANCE COMPANIES to deliver on service or ETHICS . . .and they have gone elsewhere. Now Stranded Life is purchasing brokers – dealing direct either in their own name or through companies Like TENET Group – further restricting competition, by their appointed representatives – many made redundant form Sub Standard Life – who were given redundancy – purchased adviser businesses – and other than CHURN BUSINESS – continue to fail by refusing to provide service to policyholders. One such person is Andrew Redpath, Redpath Financial Planning in Watford – an appointed representative of Tenet Connect Services Ltd ( and Chief Executive Martin Greenwood confirms he is IFA status under Tenet Connect Services Ltd ). I wonder if the FCA popped in on their way to the Grove ? and on their way to spending £ 100, 000 ? ? ? ? ?

  6. The FCA having failed in so many other areas of ” regulation ” is it surprising they have FAILED once again on Simplified Advice ! Having spent over £ 100,000 to go to the Grove Hotel in Watford – for their personal benefits ( facials – after having lost face . . . or a spa or a swim with the Countries Tax Money ( thanks Mr Osborne ) . . .or just to rub shoulders with those other regular failures the England Football team – who also hide out in the Grove ? The difference being the England football team play in the first division – whilst FCA is third rate . The reason for the FACIALS at the Grove – is to SAVE FACE ! The FCA refuse to identify with simple words Independent and Tied Agents ( which means they are restricted on products or services – and THEY CANNOT CALL THEMSELVES ” Independent ” ( or almost Independent as they do at St James Place ). Those who are Tied and or Restricted can AIM TO BE INDEPENDENT – or they can satisfy the area of the market in which they choose to operate ( Whether through choice – or under the restrictive Trade Practices and huge Costs employed by the FCA – to deter Independence to force through their ” simplified advice “, and DESTROY INDEPENDENT FIANNCIAL ADVICE. Independent advice is restricted to the few under Captain Cameron and his cronies . . . .and the poor who will be restricted to tied advice – often referred to as partial advice ( but that is what they may need ? ) . . . . .We do see the many faces of Board rooms defectors form LloydsTSB Group – who have inveigled themselves into the FCA at the highest levels . I wonder how much that cost each of these individuals ? Once they had offered inducements – were they open to invitation to the Grove from Mr Wheatley . . . . . for their benefits in kind ? Inducements as the FCA call them – applied to advisers and product providers but the hypocrizzy . . . .menas freebies are available to the FCA . I wonder who sponsored these events ?

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