FCA issues new guidance for firms offering ‘streamlined advice’

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

The FAMR final report, published in March 2016, made a series of recommendations for the FCA, the Treasury and other regulators to take forward to make financial advice and guidance more affordable and accessible.

FAMR recommended that the FCA should produce new guidance to support firms delivering streamlined advice, supported by examples of good and poor practice.

The report described streamlined advice as "a term used to collectively describe advisory services (such as focused and simplified advice) that provide a personal recommendation that is limited to one or more of a client’s specific needs. The service does not involve analysis of the client’s circumstances that are not directly relevant to those needs".

Streamlined advice includes both automated, ‘robo advice’ services and also face to face advice.

The FCA's guidance consultation stated: "Having a clear idea of the nature of the clients at whom the service is aimed and their needs will help firms to identify the scope of the service, select products that are potentially capable of meeting the needs of the relevant clients and take appropriate steps to filter out customers who are unlikely to have their needs met by the service at an early stage."

However the regulator warned that although streamlined advice services may be designed to deal with more limited client needs, "any personal recommendation which is given to a client through a streamlined advice service must nevertheless be suitable". The FCA stressed that "offering a streamlined advice service, with a narrower scope, does not allow a firm to lower the level of protection due to clients".

When identifying intended clients for the service, the FCA is asking firms to consider how much clients have to invest, what specific consumer need the service is designed to fulfil, who the service is appropriate for, and what level of financial knowledge clients have.

As well as streamlined advice, the FCA will produce new guidance on fact find information, the perimeter of regulated advice and a factsheet for employers and trustees.

Specifically, the FCA will produce new guidance to support firms offering services that help consumers make their own investment decisions without a personal recommendation and, along with The Pensions Regulator, develop and promote a new factsheet to set out what help employers and trustees can provide on financial matters without being subject to regulation.

Tom McPhail, Head of policy at Hargreaves Lansdown, commented: “There is a lot of detailed and dedicated work here. The rules of thumb provide clear simple messages for all. Above all, we want a financial services system which delivers accessible solutions for all investors, and which encourages them to make the most of their financial future without compromising on regulatory protections. Probably the most challenging area and the one most important to get right, is the boundary between advice and guidance: Investors need to be able to access cost-effective support whilst having absolute clarity about the nature of the service they are receiving.”