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Regulator backtracks on sales/advice split

The FSA has backtracked on its interim report statement over the sales/advice split and will now allow single and multi-ties to use the adviser label.

In its RDR feedback report, the FSA proposes dividing the market into two categories called independent advice and sales. Sales will be split into three channels – non-independent advice, guided sales and execution-only. Non-ind- ependent advice refers to tied and multi-tied advisers who are offering full advice services from a limited range of products.

Guided sales, which was previously referred to as primary advice, aims to be a sales process for customers with simpler needs but will be available both on an advisory or non-advised basis. The third category of other non-advised sales primarily refers to execution-only services.

If the creation of an independent professional standards board goes ahead as proposed, the FSA says non-independent advisers and guided salespeople will have to adhere to the code of practice as set out by it and minimum professional standards.

The FSA will require non-independent advisers to meet the same or equivalent professional standards as those that will apply to independent advisers. It says guided sales will operate under the current regulatory framework and it will not develop a new regulatory regime. The FSA says non-independent firms will have to decide and make clear how much they will charge for advice services and how the charge can be paid, just as the independent advice firms will.

Compliance consultant Adam Samuel says: “The FSA has not indicated clearly how the non-independent sector will be required to make it clear their advice service is a sales advisory ser vice and not an independent one. That is absolutely fundamental to the proposals. Will the FSA clamp down on wealth man- agement firms such as St James’ Place and Barclays? Will they be required to say prominently, ‘this is a sales advisory process, it is not independent?'”

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