PIMFA urges Financial Conduct Authority to provide firms with the confidence they need to offer a Simplified Advice model

29 February 2024

 

PIMFA urges Financial Conduct Authority to provide firms with the confidence they need to offer a Simplified Advice model

PIMFA, the trade association for wealth management, investment services and the financial advice and planning industry, has called on the Financial Conduct Authority (FCA) to provide firms with the regulatory clarity they need to offer consumers a Simplified Advice model.

In its response to the FCA’s Advice Guidance Boundary Review and proposals for closing the advice gap, PIMFA has suggested the way to provide both certainty to firms and consumer protection to clients, would be to ensure Simplified Advice is seen primarily as a transactional service to meet a stated client need or question which would drastically reduce the information an adviser is required to collect from the client based on the type of product or service they are advising on.

To achieve this PIMFA is urging the FCA to consider the introduction of a fact find which is geared towards meeting the client’s need rather than asking open ended questions which could uncover information which is not directly related to this need.  This will ensure that the advice given is focused on a specific outcome and client need, rather than taking consideration of the client’s wider needs and objectives which is currently required were they providing holistic advice.

PIMFA has also argued that the FCA consider introducing a stripped down way for providers of Simplified Advice to Know Their Customer. Further, PIMFA is urging the Regulator to include decumulation within its proposals for Simplified Advicegiven the very real value a personalised recommendation can play for savers needing certainty at retirement This stems from PIMFA’s research (1) which shows non-investors in particular value a recommendation relative to their own personal circumstances in order to encourage them to invest.

Moreover, while PIMFA welcomes the fact that the FCA has raised the monetary cap for Simplified Advice, we would urge the Regulator to consider scrapping it altogether given that the existence of the cap does not serve any real purpose. Further, the existence of the cap might prevent potential clients from accessing a personal recommendation or worse, lead them into inefficient investment solutions. If, for example, they were unable to find an adviser willing to offer them holistic advice on savings of £100,000 they would only be able to use the Simplified Advice process up to the £85,000 limit while the remaining £15,000 would have to be treated on an execution-only basis likely in the same solution. This illustrates the arbitrary nature of the cap and adds complexity where none is needed..

Simon Harrington, Head of Public Affairs at PIMFA, commented: “We welcome the FCA’s Advice Guidance Boundary Review and believe the Regulator’s proposals show real progress towards closing the advice gap.

“We also note the FCA’s own comments at our own Compliance Conference last year that it would take its time to get its proposals right. With that in mind we would urge the Regulator to take note of the changes we are advocating for particularly related to Simplified Advice which, we believe, has improved significantly since its previous Core Investment Advice proposals’.

“For simplified advice to work it needs to provide regulatory clarity for firms and has to be commercially viable. To provide regulatory clarity, we believe that the FCA needs to accompany the introduction of simplified advice with a specific chapter in COBS and accompanying guidance which outlines what questions should, and should not, be asked to clients to meet specific needs. Firms should then have the flexibility to design processes around this which meet the Regulator’s expectations.. This will reduce their potential liability in the event of future complaints and make them certain that the service they are delivering differentiates sufficiently from holistic advice. 

“In order for it to be commercially viable we believe that the scope of the service should be expanded. There is very real value in allowing the sale of decumulation products to be included within simplified advice, provided that focus is on what the client decumulates with, rather than gaining an understanding of how they should decumulate. More broadly, we would urge the FCA to reconsider the £85,000 cap which we believe serves little, if any purpose.” 

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NOTES TO EDITORS

About PIMFA – the Personal Investment Management & Financial Advice Association

• You can read our response to the Advice Guidance Boundary Review here.
• PIMFA is the trade association for firms that provide wealth management, investment services and the investment and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
• The sector currently looks after £1.65 trillion in private savings and investments and employs over 63,000 people.
• PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families to charities and pension funds, all the way to trusts and companies.  Associate members provide professional services to the PIMFA community.
• PIMFA  leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
• PIMFA has made numerous recommendations to the FCA regarding the Future of Advice, the Future of Supervision and the FSCS levy – read more.
• PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
• Find out more about PIMFA’s Diversity and Inclusion work – read more
• Further information can be found at pimfa.co.uk

Contact

For further information on this release or other press matters please contact:

Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376 / +44 (0) 7843 903258.

Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk, +44 (0)20 7011 9869