British regulators have issued new guidance that aims to help financial firms develop automated advice services, and other novel distribution models, for clients seeking simpler, cheaper advice.
The UK’s Financial Conduct Authority (FCA) Friday published the new guidance in an effort to clarify what constitutes regulated advice, and to help define the boundaries between different investment sales models and advice delivery methods, including the use of social media. The FCA says that the publication is designed to support firms that want to provide simplified advice, or sales without a recommendation.
“We want to ensure we have innovation in the advisory market and new, lower-cost options available. Today, we’re aiming to address some of the barriers that firms have identified to offering new, streamlined advisory products,” said Christopher Woolard, director of policy, risk and research at the FCA.
“We believe that a healthy retail investment market is one in which there are a number of different distribution models to suit a broad range of investors. We want to give firms the confidence to innovate to achieve that,” he added.
Along with the new guidance, the FCA also published the results of a recent review of firms’ experience with distribution models that don’t provide regulated advice. That review found that, “… a number of firms had decided not to develop simplified advice services due to uncertainty about how to apply [the FCA’s] suitability rules, and the risks and potential liabilities from delivering this advice online.”
It also found that uncertainty about the regulatory requirements for these sorts of services, or an overly-cautious interpretation of how the rules applied, “were leading some firms to leave out features that could reduce the risk of poor customer outcomes.”