The Financial Conduct Authority needs to decide how to handle online companies that give advice on their websites through decision trees, Gina Miller, founder of investment manager SCM Group said, citing Nutmeg as an example of a business operating in this way.
Nutmeg is not regulated to give advice but “that is what they are doing”, Ms Miller said.
But Nick Hungerford, chief executive and founder of Nutmeg, said his business is a discretionary investment manager that does not currently give investment advice.
He said: “The customer chooses one of ten portfolios, depending on their attitude to risk, contributions and time horizon.
“We are in regular correspondence with the FCA to ensure we remain within their regulatory permissions and they are fully informed about what our current offering/position is.
“We have recently announced that we will be increasing the scope of our services to include financial advice. This new stage in our development will enable us to help a wider range of people with a broader range of questions.”
Ms Miller added that the minute a firm makes a recommendation or sends a suitability report and letter, “and one is generated off your website through a series of questions, that is advice”.
“They are not regulated to give advice and there is a potential for a massive mis-selling because if your sitting in front of your computer you think you’ve received advice.
“Simple test, if it looks and feels like advice then it probably is advice. If you’ve been taken down a decision tree and you’ve been told this is where you should go, then you’ve been given advice. It is a very simple test.
“I don’t know why the FCA is not taking this more seriously, I’ve approached them on a couple of occasions and they’ve said it is because they don’t want to stifle innovation. That is a pathetic excuse.
“That can’t be the way you promote growth in the sector and innovation in the sector it has to be a level playing field for everybody.”
An FCA spokesperson said that in response to calls from the industry, it has done a substantial amount of work in this area.
“Last year we published guidance that sought to explore some of the barriers that firms think they face in offering new, streamlined advisory products and the definition of advice. Additionally, we are also holding an event on new forms of advice, which is taking place later this month.
“In our guidance we also sought to explain where a personal recommendation is given and therefore where something is advice. There is no one-line answer to that question because it very much depends on the circumstances involved and it is obviously impossible for us to cover every possible variation.
“The paper explains the regulatory framework, the rules and EU guidance and goes further - to help give clarity we have provided some examples of particular scenarios and given our view on whether a personal recommendation has been given, along with the reasons why.”