According to CMS: "This change will reduce the risks of regulated firms carrying on a regulated activity without the proper authorisation and enable them to provide customers with more accurate information in their financial decision making."
There will be no change, however, for other firms and individuals falling into Category B firms and these firms may be regarded as giving regulated advice even though no personal recommendation is involved.
There has been more clarity in that IDD exempts from regulation firms who sell insurance as an add-on product to their principal goods or service, provided the premium does not exceed a certain amount and the risks covered by the product are limited.
However, the directive states that life insurance products and liability risk cover could not qualify for this exemption.
The UK government intends to continue to exclude such products from the connected contracts exemption.
This is because these products are complicated, and, if mis-sold could lead to significant consumer detriment. As such the government believes their distribution should continue to be regulated.
Alan Lakey, founder of CI Expert, says advisers should not need to worry too much about changes to the definition of advice under the IDD, despite the plethora of consultations and regulatory discussion about what constitutes advice.
He comments: "There doesn’t appear to be much requiring alteration. However it does highlight the futility of trying to micro-manage the process when all that is needed is a clear demarcation - if you are an adviser you advise, if you are not then you don’t."
simoney.kyriakou@ft.com
