Regulation  

FCA ‘mindful’ of Fos claims potential over simple advice

The Financial Conduct Authority is aware of the obstacle to the roll out of simple advice processes posed by Financial Ombudsman Service scrutiny and the potential for claims, but has warned it has no power over the claims adjudicator to change its approach.

Speaking at an event in London today hosted by financial services software firm eValue, Rory Percival, technical specialist at the regulator, revealed during an at times terse exchange with advisers in the audience that it will imminently be publishing ‘thematic work’ into the subject.

In February, the FCA told the Treasury Select Committee it is set to launch a consultation on simplified advice within the next quarter, with the aim of eventually publishing financial guidance.

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Mr Percival said the regulator would be publishing its findings soon and that it will cover both simplified advice and non-advised. The latter has been the subject of particular concern across the industry of late over consumer confusion as to when a service has crossed the line into advice.

Giving evidence to the Treasury Select Committee earlier this year, FCA head Martin Wheatley came under fire from MPs who demanded answers as to whether consumers could confuse execution-only with advice when using a web-based advice system.

Mr Percival said the FCA is “currently doing a thematic piece of work aiming to look to look at understanding how markets work in this area and whether the regulatory framework is supporting firms to give a good outcome to clients and helping them to achieve that”.

He told delegates today that the FCA wants to know “why firms are struggling with automated processes and whether firms understand what the requirements are”. He said he could not perform more of a steer as the FCA intends to publish the consultation “shortly”.

One audience member asked whether the Financial Ombudsman Service will treat complaints about simplified advice “fairly”, adding that is one reason why advisers have not built a simple advice propositions to address the advice gap.

Mr Percival emphasised that the Fos is “different to us” and the regulator has no power over it. “It’s not down to us what they do,” he said.

However, he emphasised that the FCA is keen to see firms develop simple propositions and added it was “mindful [Fos] is an issue and that has been factored into our thinking”.

Another audience member then criticised Mr Percival for not talking about the processes to help people at retirement following the changes in the Budget, accusing him of not dealing with “current issues”.

Mr Percival responded that the regulator has released post-Budget guidance, giving more detailed instructions for providers and intermediaries who deal with consumers at retirement.

His earlier talk had focused on centralised investment propositions and risk profiling, during which he suggested to delegates that they re-read papers that were issued on this by the then Financial Services Authority three years ago.