The FSA has proposed a primary advice service, which it likens to an “off-the-peg suit” as opposed to a bespoke suit, in its RDR discussion paper.
The paper states that a primary advice service would not consider a consumer’s needs in great depth but match their circumstances or needs to that of a segment of the population which shares similar circumstances or needs.
Primary advisers would use a specific set of industry-wide criteria to match consumers to a population segment. The regulator claims this would allow simple advice to be delivered cost effectively by firms.
The paper suggests primary advice should be limited to products which meet set criteria such as appropriate protection products, cash or equity Isas and generic investment products with certain characteristics which could include the low risk of capital loss and pre-defined diversified asset mixes.
The FSA suggests the available range of investment products should be wider than the stakeholder product suite. The paper states the available products would not be subject to charge caps that might limit the margins available and could be approved and endorsed by the regulator.
The paper states that consumers must be made aware of the scope and limitations of the advice and directed to a full specialist professional financial planner if necessary.
The FSA has focused on consumers who have the resources to take out medium and long term savings and protection products but have not done so for whatever reason, and consumers who are currently saving and/or protecting their families but are not doing so optimally.
The paper states: “Although this may lead to suboptimal outcomes for some, overall it would put consumers in a better position than having no access at all.”