RegulationMar 26 2015

FCA reviews less stringent independent advice standard

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
FCA reviews less stringent independent advice standard

The Financial Conduct Authority has asked for views as to how far a more modest European definition of ‘independent’ advice is “practically different” to its own standard, in a move that could pave the way for a major shift in the standard applied under RDR.

In a consultation paper on the Markets in Financial Instruments Directive, published today (26 March), the regulator says it continues to believe independent advisers should consider all types of product which may be suitable, rather than merely be independent of providers.

Mifid II’s standard is different, just asking independent advisers to look at a “sufficient range” of products from a “sufficiently diverse group of providers”. This allows IFAs to redefine the breadth of products they need to consider before providing a personal recommendation, the paper said.

“We would welcome views on this point – in particular, on how far Mifid II’s standard is practically different to our existing standard, particularly from firms holding themselves out as independent financial advisers,” the FCA’s paper states.

The regulator added that it needs to ensure that any independence standard is clear, both to firms and consumers.

At the end of last year, David Geale, the FCA’s head of policy, told FTAdviser that a consultation into advice labels may see such ‘tagging’ being ditched in favour of a more qualitative approach, looking at how services are described to consumers.

In the new paper, the watchdog adds: “We have worked hard over the last couple of years to ensure a consistent approach for firms delivering advice, and have worked with firms to ensure that consumers understand what service they are getting.”

However, the paper acknowledges that consumers do not understand the difference between restricted and independent advice.

“While our recent post-implementation review of the RDR shows that we continue to have work to do in ensuring consumers understand and engage effectively in this market, any material change in our expectations risks creating more consumer and industry confusion.”

The FCA wants to hear responses to its consultation by 26 May.

donia.o’loughlin@ft.com