Emma Ann Hughes 

Why the FCA should assess best advice

Emma Ann Hughes

Emma Ann Hughes

A man walks into a branch of a high street bank and asks the school leaver walking around with an iPad how he can get on the housing ladder.

The person fresh from passing their GCSEs and no doubt still relying on a different bank more than the one they get a pay packet from – the one of Mum and Dad - skims down the list of rates and points out a few deals.

The first jobber then suggests setting up an appointment with the bank’s adviser “so they can assess what is the best deal for you".

The man aspiring to buy his own home then meets with the adviser who recommends the most suitable deal from the bank they work for.

But was that what the man wanted?

Did he want the most suitable advice from an intermediary who at best is only able to pick from a handful of provider’s products?

Or did he want the best advice with an adviser scanning the investment, mortgage, pension and protection universe and selecting a blend of products that are most likely to see them sleeping soundly each night under the roof of their dreams?

I would argue it is the latter.

Yesterday (18 May) the FCA reported restricted firms and network members do a better job at giving suitable advice and making clear how much they charge for their services than IFAs.

Over the past year the regulator reviewed 1,142 individual pieces of advice given by 656 firms as part of its suitability review.

The results found 97 per cent of restricted firms were providing suitable advice while 90.8 per cent of independent firms were doing so.

There was a similar gap with network membership, where 91.4 per cent of directly authorised firms were providing suitable advice and 97.2 per cent of network members were doing so.

This was an important review. It is vital the regulator keeps tabs on whether advisers serve consumers to the best of their ability and clearly spell out how much they charge.

But is “assessing suitability” the right focus? I have never heard anybody say they want “suitable” advice. What they want is the “best.”

I am not saying that “suitable” isn’t good. It is adequate and meets your needs.

But is it really what people hope for? I would like to see statistics on who gave the best advice as well as who gave the most suitable advice.

It would be nice to see the next assessing suitability review the FCA carries out in 2019 extended to check whether consumers walk away with not just suitable advice but the best product that was available at that time.