Regulation  

FCA warns advisers on suitability responsibilities

FCA warns advisers on suitability responsibilities

The Financial Conduct Authority has warned advisers not to avoid their responsibilities when offering streamlined advice.

It has published a guidance consultation on a series of issues which came out of the Financial Advice Market Review.

These include streamlined advice, and the FCA has now published guidance to give firms confidence to provide this service.

For example it suggested that firms should have a “clear idea” of the type of clients the service is aimed at and could “triage” them to make sure they receive an appropriate service.

Streamlined advice is a term used by the FCA to collectively describe advisory services (such as focused and simplified advice) that provide a personal recommendation that is limited to one or more of a client’s specific needs.

The service does not involve analysis of the client’s circumstances that are not directly relevant to those needs.

Firms offering streamlined advice can only collect information that is necessary to provide a suitable recommendation, but they have been warned that this does not allow them to lower the level of protections they owe to their clients.

For example clients buying an investment product need to be asked about their level of indebtedness and access to liquid cash.

The FCA said: “Some firms have asked for more clarity on the amount of information they should collect from their client when offering such a service.

“It is not possible to be prescriptive about the detailed information required, since it will always depend on the particular situation and the many factors involved.”

It added that offering streamlined advice does not allow firms to create “ambiguity or confusion” about their responsibilities.

The FCA said: “The suitability assessment is a firm’s responsibility and a firm should avoid indicating to the client that a certain financial instrument is the one that the client chose as being suitable, or requiring the client to confirm that an instrument or service is suitable.”

Elsewhere, the consultation also discussed the process of carrying out a fact find and the “portability” of this information from one adviser to another.

But the FCA has said that standardisation could most easily be achieved on the “objective” information provided in a fact find, such as a client’s name, address or job.

And it said that this element of the fact find is already broadly standardised across the market.

It said: “The remaining information, however, is more qualitative. This includes information such as the client’s level of knowledge, previous investment experience, and attitude to risk.

“The qualitative information may present greater challenges in terms of standardisation, because the manner in which this is collected is generally determined by firms’ methodology for assessing the qualitative information.”

It has therefore proposed that it will not publish a standardised fact find proforma.

The consultation also looked at non-advised services and warned advisers that providing a personal recommendation would be a regulated activity even if it was implicit.