The Financial Conduct Authority should ditch requirements for advisers to describe themselves as ‘independent’ and ‘restricted’, according to the Association of Professional Financial Advisers
In the first of a two-part video interview with FTAdviser’s Emma Ann Hughes, Chris Hannant, director general of the Association of Professional Financial Advisers, said the regulator’s labels failed to help consumers understand what service they were getting.
Mr Hannant said the trade body would not like the Financial Conduct Authority to come up with new definitions of the type of advice offered by his association’s members and instead would prefer a system with no formal labels in a similar way to the upcoming mortgage advice reforms.
He said: “I think we prefer to see something along the lines of the Mortgage Market Review, whereas the service provider just has to disclose the basis of their proposition.
“I don’t think labels help. I think if people are trying to communicate the basis of their advice they are better off just talking to customers in the language they understand and regulatory definitions are not something the customer understands.
“I think any language used has to reflect its normal meaning so ‘independent’ should reflect what normal consumers understand by being independent, as opposed to whole of market in every single service.”
Mr Hannants comment come in the wake of an admission from senior figures at the regulator that the new advice dichotomy is not “completely working” at an industry roundtable reviewing the first year of the reforms.
Director of long-term savings and investments Nick Poyntz-Wright said there was still a lack of clarity over the new definitions and that the FCA would be “redoubling our efforts” in the coming year.
Martin Wheatley, chief executive of the conduct watchdog, also admitted there was more work needing to be done on clarifying the definitions but he stressed it would not be seeking a formal change the rules.
Click here to watch the interview with Chris Hannant. The second instalment of the two-part series will be published next week.