In November, the City watchdog published a consultation into simplified advice to make it cheaper and easier for firms to advise consumers on a handful of mainstream investments within stocks and shares Isas.
As part of the regime, the FCA said it will create a new handbook definition of core investment advice.
In a response to the Treasury committee published today (January 30), the City watchdog said the core investment advice regime would retain most of its current rules.
The revised qualifications for the core investment advice regime are commensurate with the narrower scope of the advice to be given.Sarah Pritchard, FCA
Advisers providing simplified advice will still need to gather sufficient information to make a personal recommendation, ensure any recommendation is suitable, adhere to product governance rules, disclose initial and ongoing charges and provide a suitability report.
“Should such a regime come into force, we will monitor and supervise its implementation and operation, including using data where appropriate, and take timely action where we identify issues,” the regulator’s executive director for markets, Sarah Pritchard, said.
“We would expect firms to have appropriate processes in place to triage potential clients effectively.
“As part of the suitability assessment process, firms must ensure that those with more complex financial needs are identified as requiring services beyond core investment advice.
“We recognise that a stocks and shares Isa product will not be suitable in all circumstances, which is why firms will still need to assess suitability for each client they advise.”
In her response, which was submitted to the Treasury sub-committee for financial services regulations, Pritchard also said the revised qualifications for the core investment advice regime “are commensurate with the narrower scope of the advice to be given”.
Core investment advisers will be required to pass two modules of the existing RQF Level 4 qualification for financial advice: financial services, regulation and ethics, and investment principles and risk.
We would be concerned about providing an anticipated price point [for simplified advice].The FCA
But they will not need to pass the additional examination modules required within the holistic financial adviser framework, such as on retirement planning or protection planning, which the City watchdog said “are outside of the scope of core investment advice”.
Under its proposals, consumers receiving simplified advice will have access to Financial Services Compensation Scheme protection, as well as be able to complain to the Financial Ombudsman Service.