The Financial Conduct Authority is set to launch a consultation on simplified advice within the next quarter, with the aim of eventually publishing financial guidance.
Giving evidence to the Treasury Select Committee, Martin Wheatley came under fire from TSC head Andrew Tyrie who demanded answers as to whether consumers could confuse execution-only with advice when using a web-based advice system.
Mr Tyrie said: “Can a product sold on the web constitute an advice sale? Some vanilla products are only sold on the basis of advice - when a bank offers a bank account or a straightforward savings account, should that account be offered only after intervention i.e. human advice?”
Mr Wheatley said this will differ on the client, adding there will be a “degree of intervention” if they are not an existing client.
When pressed further, Mr Wheatley said he cannot give a “blanket answer”, adding: “clearly there are some that can only be sold on an advice basis and not execution only”.
Mr Tyrie asked if there was a possibility that someone could believe they are getting advice when they are not, adding that if is not an advice-based product then a degree of caveat emptor would exist and it needs to be clear whether advice is given or not.
He asked: “Is it possible for a firm to give advice on the web without human intervention?”
“Yes,” Mr Wheatley said.
Mr Wheatley could not answer Mr Tyrie’s question as to how the distinction could be made between web-based advice and execution-only.
He said: “It’s a real concern because the distinction between product advice and execution only is not a distinction people can naturally determine.”
Mr Tyrie added that if no clarity is given there is “a danger others may withdraw from the market” if they think their offering does not constitute advice “but then you decide it does”.
Mr Wheatley said the FCA is “working with the industry” to make that divide amid concern there is not clarity between the two.
He said: “Future guidance is needed and we will be structuring a paper on this within the next quarter.”
When asked if this will give definite guidance, Mr Wheatley this will be a formal consultation, which will be followed by finalised guidance.