Emma RadmoreFCA has issued an update on how it and the Treasury will carry out their joint review of the boundary between advice and guidance. Industry feedback has made it clear that consumer needs for advice are diverse, entail risk and that the risk and therefore the costs of advice need careful management. FCA says it is clear that any solution will rely on support being provided on a commercial basis. The review will focus on outcomes and should leverage the Consumer Duty. The suggestions made in FCA’s 2022 consultation on a core investment advice regime are not being taken forward, and the discussion will now be rolled into this wider review.
For the time being, FCA has published some clarificatory examples of how firms can support consumers without providing a personal recommendation – none of which changes the current regulatory perimeter. The examples include:
- purely factual information which expresses no judgement;
- generic or general advice that does not relate to a particular investment – for example, telling customers how to work out how much they can withdraw from their pension, explaining the difference between ISAs and pensions or explaining the consequences and risks of single or joint annuities;
- publishing general suggestions that customers take particular action, where a firm considers on reasonable grounds that the action is in the best interests of all its customers generally – for example to avoid extra costs or mitigate losses. It could publish this general information on its website, or, if interacting with one specific customer, could avoid making a personal recommendation by making it clear that it does not have enough information from the customer to determine whether a particular decision is suitable for them;
- providing a view on the general merits and potential disadvantages of taking a certain course of action without expressing or implying the action is right for the particular customer or based on that particular customer’s circumstances. An appropriate disclaimer could also help here;
- signalling to a customer the drawbacks of holding significant uninvested funds in cash;
- warning customers of:
- the implications of a pension transfer the customer wants to do;
- the potential consequences of withdrawing funds;
- the risks of being scammed or defrauded where the customer requests a transaction;
- the consequences of stopping payments due to cost-of-living concerns; or
- the risks of a long-held portfolio potentially being no longer suitable for the customer’s needs.
FCA says FOS will take its guidance into account if looking into a complaint about help firms have given.