RegulationJul 23 2014

FCA’s simplified advice stance not in consumer interest

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The regulator’s current stance that only restricted advisers can offer ‘simplified’ advice means IFAs will have to choose between retaining their business proposition and offering the service, something not in the interests of clients according to Intelligent Pensions.

Early this month, the FCA published its consultation paper on simplified advice which revealed that only restricted advisers can offer ‘simplified’ advice as the products available are likely to be limited to one or more product providers.

The paper said: “If a firm provides simplified advice (which is restricted advice) in addition to independent advice, it should not promote itself as a provider of independent advice for its business as a whole (nor would it be appropriate for the firm to include the word ‘independent’ in its name).”

Speaking to FTAdviser, Steve Patterson, managing director at Intelligent Pensions, said simplified advice appears to be the “fastest growing area of financial transactions and consumer engagement”.

He said: “When people are looking to make financial decisions, many are turning to the internet for information and guidance, so being able to package this in a simple and user-friendly manner will certainly help attract new clients.

“It would appear that the only way that IFAs can play a part in the streamlined online advice process, that is the fastest growing part of the market and delivers advice cost effectively to consumers, is that they cease to be IFAs.

“This seems incongruous and for firms who rely upon their independence as a key aspect of their business proposition, for example to maintain relationships with other professional firms such as solicitors and accounts for client referrals, an unnecessary imposition by the regulator.

“That cannot be in the interests of consumers and the FCA should adopt a more flexible stance.

“General IFAs are general practitioners and while they must be willing and able to advise in all areas, that shouldn’t mean that for more complex cases they run the risk of losing their independent status by bringing in another firm that has the specialist expertise and experience.

“The consumer seems to be the main loser in this overly prescriptive regime.”

Rab Shields, IFA at Simple Solutions Financial Management, wrote in an Adviser Rant column on FTAdviser yesterday that consumers need choice and expertise in financial services, and if an IFA “wants to offer a simplified advice process as well as fully independent advice, then surely the consumer will benefit”.

He wrote: “Someone seeking simplified advice today may need independent advice in the future as their circumstances change. Surely it is better for the consumer if that advice is seamless and provided by the same adviser or firm.”

While Intelligent Pensions would like to see the current ‘simplified’ rules change, it said the regulator “appears adamant in its resolve” to have independent advice meaning whole of market and “never anything less”.

Mr Patterson said: “However, we have concerns that clients will be the only ones who suffer from this decision, particularly in light of the pensions reforms and guidance guarantee, where thousands of people will be in need of support prior to, at and after their retirement.”

Mr Patterson also predicted that if the regulator prevents IFAs from participating in streamlined and simplified models, “we believe there will be a reduction in the number of IFAs in the UK”.

FTAdviser has previously reported that there is a slow but steady move to a restricted proposition from independent.

In April, data collated by FTAdviser revealed that of a sample of 10,539 advisers, 2,538 (24.1 per cent) said they were restricted while 8,001 identified themselves as independent. This represented an annual rise of almost 3 per cent.