Regulation  

FCA: Guidance will help identify ‘implicit’ advice

FCA: Guidance will help identify ‘implicit’ advice

Final guidance on the boundaries between various advice options is not meant to be prescriptive but merely help firms identify when, for example, they have implicitly given a personal recommendation, the FCA has said.

Together with Gary Brown, author of the 47-page final guidance paper on retail investment advice boundaries and “barriers to development” (FG 15/01), David Geale, director of policy at the FCA, said it was not creating new labels but clearing up confusion around existing ones.

Mr Geale said the paper aimed to delineate what is, and what is not a personal recommendation, and what constitutes ‘simplified’, ‘focused’ (limited) and ‘generic’ advice. This was simply to clear up the confusion that had plagued some advisers, he said.

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In responses the FCA was particularly asked to give further clarity on the tipping point to giving advice.

It all rests on whether the advice leads to a recommendation. It would require the adviser to have QCF level 4, to abide by the remuneration rules set out in the RDR and the client would have access to the ombudsman in the event of any complaint.

So what of firms that want to give basic guidance, with no personal recommendations?

The paper suggested that there are firms that have been giving generic advice, perhaps in the form of newsletters or blogs, which could actually be construed as a form of simplified or limited advice - and therefore regulated, because it could lead to a client taking action to invest.

Mr Brown said the paper aimed to highlight these issues and help advisers tread the boundaries more carefully.

He said: “We spoke to a lot of firms because they wanted to be clear on what they could put out and what they could not.

“Sometimes newsletters come across as implicit recommendations. So partly this paper aims to help them understand what firms can and cannot say under the label of generic information or advice.

“We worked with firms within the consultation period and they were receptive to what we said and this will help firms present newsletters in a way that does not give an implicit recommendation.”

Mr Geale said there was clarity among advisers about the extremes, such as full, regulated financial advice, which could be independent or restricted but would consider a client’s holistic needs.

However, the paper revealed that some advisers came unstuck around focused (limited) advice, some execution-only services, and simplified advice.

While it delineated these to help advisers work out what particular service they provided, the paper did not say advisers needed to explain all these different labels to their clients.

Mr Geale said: “We don’t expect the adviser to market themselves as giving limited or simplified advice. But we do expect the adviser to give the right service.”

For example, suppose someone goes to an adviser wanting help with their Isa. The adviser must explain whether he or she is independent or restricted, but they do not need to go into detail labelling the advice as simplified, limited or focused.