Regulation  

Simplified advice will require provider liability, say advisers

Simplified advice will require provider liability, say advisers

Advisers have said Pimfa’s recommendation of simplified advice to the Financial Conduct Authority will need to see the provider and not the adviser held responsible “if it all goes wrong”.

Today (July 6), adviser trade body Pimfa laid out proposals for a new form of regulated advice which would allow advisers to “diverge sufficiently” from current suitability requirements and advise on a restricted range of products for lower value clients.

Pimfa told the Financial Conduct Authority that to facilitate this, it would need to change its handbook to provide firms with more confidence and issue prescribed questions to help firms establish suitability.

The FCA has told FTAdviser it has seen Pimfa’s report and will consider the recommendations made to it.

Meanwhile, advisers have shared their thoughts on the proposals. Panacea Advisers chief executive Derek Bradley said: “The problem with delivering any form of financial advice is ensuring that the client actually understands the advice given.

“When things go wrong it is always about the advice, never, ever the product.”

To make Pimfa’s simplified advice work, Bradley said products will need to be certified as fit for the simplified purpose they are being designed and recommended for.

He said the provider whose products are being recommended should be responsible for assessing that it fits.

“Any advice and linked product application should have a declaration on it, signed by the client to confirm they understand the simplified advice given, they agree it fits their circumstances, and that it is affordable,” said Bradley.

“The declaration should also show the client understands the simplified product, what it does, why and how much it costs and if it all goes wrong, the provider is responsible, not the adviser.”

Managing director of Wessex Investment Management, Kevin Bailey, thinks for this type of advice model to work, the onus is on the FCA not to skirt around the detail.

“The FCA needs to be very specific about what is and what isn’t acceptable with regard to simplified advice to ensure consistency amongst firms,” he said.

“There is no room for mis-interpretation and there needs to be a level playing field amongst firms.”

‘Light touch regulation doesn’t mean low quality advice’

Some advisers are more excited than sceptical of the proposals. Founder of financial planning boutique Addidi, Anna Sofat, said Pimfa’s recommendations were a “welcome move which advisory firms can build on”.

“There is a big advice gap which has not been filled by guided guidance, basic advice or robo-advice,” Sofat explained.

“This is because most people need help in making a decision, not just access to information or guidance as neither answers the question ‘is this the right solution for me’, or provide peace of mind that someone can be held responsible if things go wrong.”