For many, some form of human communication with the customer is needed to provide reassurance, to give confidence, or to simply explain the recommendation.
Regulatory clarity
Regulatory clarity on the advice process is needed to give firms confidence to innovate and introduce new propositions, with clarity needed on the FCA’s approach to supervision and published guidance from the Financial Ombudsman Service on how it would adjudicate complaints (with examples).
Protection products
Protection products are relevant for any simplified advice process and protection insurance should be included within the Advice Guidance Boundary Review
In short, the consumer duty and the FCA and Treasury’s collaborative process and technological innovation are causes for celebration, but there are supply and demand-side challenges that need to be overcome, with regulatory clarity a necessity to avoid concerns around liability.
To help tackle these challenges, some interviewees identified key features for any new simplified advice regime to be viable. (Note that no single interviewee nor the ABI is endorsing all the features below.)
1. Scope
Simplified advice could be restricted to a narrower product range or a narrow set of scenarios/needs. Although the idea of kitemarked products was not supported.
Participants thought the simplified service would more likely be offered by insurance companies, banks and asset managers with direct client banks.
2. Fees and charges
Firms/advisers could be allowed to wrap advice fees into product fees, to help convince consumers who are not willing to pay an upfront charge for advice but who can afford and will receive fair value from the service.
3. Advice process
There could be a narrower suitability assessment and shorter fact-find based on the specific need, with triaging at the beginning of the process to filter out those with complex needs, who are better suited for full advice, or those in debt or without emergency savings that are not well placed to invest at all.
4. Qualifications and remuneration
Qualification requirements could be lowered for the more heavily prescribed advice process, which would reduce simplified adviser salaries and therefore the price of simplified advice.
5. Regulatory framework
Amendments to Mifid may be needed to create a simplified regime, with a new Cobs chapter prescribing aspects of it, for example setting out a triaging questionnaire or outlining a full decision-tree approach. This would tackle liability concerns and reduce oversight and monitoring costs.
Fos would usefully give guidance and examples on how it will adjudicate complaints within a new regime.
For the full findings, including the list of research participants/interviewees, see Appendix 1 of the ABI response to DP 23/5.
It won’t necessarily be easy, but simplified advice is a goal worth achieving and we hope these lessons can be helpful for FCA and Treasury officials driving this work forward.
