‘Simplified advice’ will not be backed by firms or widely offered across the industry because the regulator has made clear there is “no such thing as simplified” with suitability and it is almost certain complaints will lead to fines “down the road”, according to Ascentric’s Hugo Thorman.
The managing director of platforms at the Royal London-backed firm told FTAdviser he does not believe in simplified advice and warned that the regulator’s strenuous efforts to open up advice to the mass market in this way will fail.
“Simplified advice, I don’t know what it is, because they are saying you are only going to know a bit about the client. I can tell you five years down the road the regulator decides that you should have known more.
“They will look back and say well ‘you should have asked this question’, and [the adviser will] say ‘yeah but we didn’t that’s the whole point of simplified advice’, and [the FCA will] say ‘yeah but you should have done’.”
Mr Thorman stated that the only answer is to be absolutely 100 per cent sure that you can control the environment; via execution only.
“There was this regular debate about why not simplified advice – the regulator was very upset about it – the answer is very simple, you can’t keep beating us, the industry and then expect us to jump into something that we can’t understand.
“You can’t be absolutely sure that you don’t open yourself up to regulatory censure after the event.”
Mr Thorman’s comments come in the week that FCA chairman John Griffith-Jones told the Association of Professional Financial Advisers annual dinner that the regulator would like to see more people seeking advice and that it is focusing efforts on its ‘project innovate’ to bring about simplified advice.
He also admitted that the regulator and its RDR project had not yet been able to answer queries relating to “guidance vs advice, and independent vs restricted advice”.
Mr Thorman said he felt the regulator’s ‘perimeter guidance’ was useful and “makes it clear what you can and can’t do with execution only”. The rules include a broad distinction defining when ‘information’ has become a recommendation and therefore advice.
“[With execution-only] it is absolutely the clients decision and the platform or an operator for a platform can provide information and the client must make their own mind up of what they do.”
Mr Thorman added the reason why simplified advice is currently getting debated so much is due to the advice gap, leading many people to believe that there should be a form of simplified advice, but that he didn’t know of anyone who was doing it or if so how they were doing it.
With the pension freedoms coming into play, demand for a simplified version of advice appears to be on the increase. Anecdotally, he said that before the Budget announcement the amount of business on the platform that could be categorised as pension was 35-40 per cent, but now it is more like 40-45 per cent of new business.
He added that drawdown has gone from about 20 per cent of Ascentric’s pension business to about 30-35 per cent.
“We are getting a lot more activity in the pensions market transferring normally, consolidation of two, three, four, five external pensions into one account on the platform.
ruth.gillbe@ft.com
