Advisers will be wary of the proposed advice-guidance boundary regime set out by the Financial Conduct Authority due to fears of being held to account and not knowing how complaints will be handled.
Speaking to FT Adviser, Alastair Black, head of savings policy at Abrdn, said simplified advice is a great offering for the profession.
“If you go into supermarkets, you can typically get a value, standard or a premium offering and within advice, we need to do the same,” he said. “We need to have a half fat and full fat option.”
But he said advisers will also be wary of any new regime due to the fear of being held to account.
“Advisers will be fearful of any new regime but they will be wary that the Fos are going to hold them to the highest standard of holistic advice anyway," he said.
"Once the government has defined what needs to go in the handbook, the FCA, Fos and the industry need to sit down and come up with a range of examples.”
Black said the Fos and the FCA can then outline to advisers that if they set up a simplified advice regime and a complaint is made, this is how Fos will interpret it.
Advisers will need to see it is clearly different from if the customer had taken holistic advice.
“What we need is a clear indication that Fos will differentiate between the two and some examples will really bring that to light and give firms confidence,” he said.
Black explained the FCA will be cautious about introducing minimum standards because of the risk that firms will simply comply with this.
However, he said as good practice emerges, the FCA will likely come out saying they have done a review in the market and this is how people have implemented it.
“They’ll set minimum standards so that people have got confidence that they're in the right place but that doesn't get you off the hook entirely,” he said.
“But if the government can set minimum standards in the handbook, and then set out some Fos examples, it could work.”
Consultation
In December, the FCA set out three proposals for reforming the advice boundary, including a simplified advice option.
The FCA and government were seeking views on three proposals.
These were:
- Further clarifying when firms can give consumers support without giving regulated financial advice
- A new approach allowing firms to provide support tailored to groups of people in similar circumstances
- A new form of simplified advice that makes it easier for firms to provide affordable personal recommendations to clients with more straightforward needs and smaller sums to invest
Black said: “We think this is probably the most important consultation that the government has done.”
He argued in terms of long term savings, there's two fundamental challenges people need to cope with, which is saving enough to manage their financial future and retirement.
“The other big financial challenge is where someone has been saving up to the point of retirement and now could have 20, 30, 35 plus years in retirement - how do they manage what they've got?
“Giving people a choice allows them to better fit their savings to match their individual needs,” he said.
“But with choice comes complexity.
