Your IndustryOct 8 2020

Advice ‘marketplace’ solution pitched to FCA

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Advice ‘marketplace’ solution pitched to FCA

A ‘pay as you go’ advice marketplace has been pitched to the City watchdog as a solution to what the regulator describes as an “unmet need” for straightforward, focused advice.

Alistair Fullerton, director at Lathe and Co, has responded to the Financial Conduct Authority’s latest Call for Input and applied to its sandbox advice unit, suggesting an online platform linking consumers with advisers offering a ‘one-off’ service could bridge the gap.

The idea centres around a digital marketplace on which advisers can post the modular, specific aspects of advice they are willing to provide, such as a fund recommendation, pension snapshot, sorting out an Isa or helping with a mortgage.

Consumers can then search for the specific advice they are looking for and compare the charges and reviews of advisers who can offer it. They will then pay a one-off fee for that specific advice.

Mr Fullerton said: “There are millions of people the FCA think would benefit from advice, but cannot afford it or don’t want to get involved in an ongoing relationship with an adviser.

“If you remove the need for somebody to open an account and transfer money in, you massively open the floodgates.

“There have been a lot of attempts to bridge that gap, but it has not ignited and robo-advice has not been the solution we’ve been waiting for.”

The backdrop

Mr Fullerton’s pitch to the regulator comes just weeks after it raised concerns there was an “unmet need” in the market for “focused” advice.

In a Call for Input paper published last month, the watchdog said it was likely there were consumers looking for “straightforward, one-off or focused advice” based on their relevant personal circumstances who were not necessarily interested in an ongoing advice relationship.

The FCA said: “Most advice is provided on an ongoing basis and we believe there is likely to be an unmet need and, therefore, an opportunity for focused advice models.

“To date, we have seen slow growth and innovation in services that meet these needs.”

FCA data shows consumers with long-term needs were well-provided for, with 94 per cent of advisers offering ongoing advice services, but it wanted to improve options consumers.

Will it work?

Mr Fullerton said the success and viability of a pay as you go, one-off advice service would “completely hinge” on the regulator’s ability and willingness to tackle the problem of consumer redress, ongoing liability and professional indemnity insurance.

He said: “It would be great to have a marketplace where consumers can ask us to give advice on smaller queries while boosting our remuneration, but no one is going to do that if it will cause a big run-off liability.

“It won’t work if in 20 years’ time, someone can turn around and say ‘I changed my Isa because of you and it has not worked out’.”

In terms of PI costs, Mr Fullerton said if a one-off piece of advice were “suddenly classed as full scale advice” in the eyes of insurers then the service would not make financial sense for advisers.

He added: “It all really hinges on the FCA’s appetite to make some changes. They’ve made some noise with this Call for Input paper, but they will need to rethink the redress side to encourage pay as you go.”

Steve Carlson, chartered financial planner at Carlson Wealth Management, agreed many consumers may benefit from a shorter, one-off process.

However, he said there was “no way” the FCA, the Financial Ombudsman Service and PI insurers would “live with the bad outcomes that would come as a result of it, even if more good than harm was done overall”.

Mr Carlson added: “There is no joined-up thinking between the FCA, PI insurers and the Fos, so the only way to protect your business is to make robust recommendations after going through a full advice process that fulfils everyone’s current requirements.

“For [the marketplace] to work, consumers would need to appreciate there is a risk the advice they are getting could be wrong as a full process hasn’t been followed, and the advice they are getting may be out of date in a few months or years without them realising it.

“Consumers would have to sign a waiver stating this.”

Martin Ruskin, chairman of the Chartered Institute for Securities and Investment’s financial planning forum committee, said it was “difficult” to see how businesses would be able to give specific advice on products in complete isolation within the current regulations.

Darren Cooke of Red Circle Financial Planning said the cost/benefit factor for consumers would also be important.

He said: “A personalised Isa recommendation requires a good deal of work, so they should be prepared to pay for it.

“For [a small fee], I could just tell them the Vanguard Isa is a good option. Have I given valuable advice for that money, or just robbed them for something they could have found out for nothing?”

imogen.tew@ft.com

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