After the Financial Conduct Authority (FCA) and the Treasury commissioned the Financial Advice Market Review (FAMR), the Review committee produced a list of 28 recommendations, all aimed at widening public access to financial services, and professional financial advice in particular. The FCA has now issued an update on its progress in implementing these.

The FCA says it has already completed implementation of 10 recommendations.

Key points from the progress update include:

• The FCA has fully implemented the recommendation to change the definition of ‘advice’, so that it is now in line with that used in the Markets in Financial Instruments Directive. Advice must now involve giving a personal recommendation, and firms can give general guidance to clients – such as suggesting they maximise their ISA allowance – without being considered to have given advice to them
• The FCA has completed a consultation on a proposal to extend to four years the period for which an adviser can give advice under supervision before needing to attain an appropriate advice qualification
• The Association of Professional Financial Advisors has published guidance to help firms understand the FCA’s expectations regarding the content of suitability reports. The Financial Ombudsman Service (FOS) was also involved in the discussions
• The FCA has established an Advice Unit to help any firms wishing to develop an automated advice (robo-advice) model
• Consumers can now access £500 of their pension fund to pay their adviser’s fee when seeking advice on their retirement options
• The FCA is consulting on a fundamental review of the way the Financial Services Compensation Scheme is funded
• The FOS has held a number of ‘Best Practice’ roundtables with industry and trade bodies to discuss issues of concern

The FCA warned firms operating streamlined advice services of the risks they were incurring by doing so. It said firms should avoid operating a ‘half and half’ advice process, where clients might be asked to confirm the suitability of particular products. It also said that using a streamlined advice process – where advice is confined to one specific financial need – cannot mean that the need to demonstrate suitability of the product is in any way reduced.

The regulator’s guidance paper says on this subject:

“Although streamlined advice services may be designed to deal with more limited client needs and may not, therefore, involve an analysis of all the client’s circumstances, any personal recommendation which is given to a client through a streamlined advice service must nevertheless be suitable.

“Offering a streamlined advice service, with a narrower scope, does not allow a firm to lower the level of protection due to clients.”

The FCA also revealed that it has rejected suggestions that financial advisers should be required to use an industry standard fact-find when gathering information on client circumstances. One of the reasons behind the FCA’s decision was the varying ways in which different advice firms assess clients’ attitude to risk.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.