A simplified advice regime could leave advisers and providers open to future mis-selling claims, and may not solve the problems in the at-retirement market, warned Syndaxi Financial Planning director Robert Reid.
One of the solutions floated is the idea of ‘simplified advice’ where people are given more personalised guidance that steps back from ‘full-fat’ bespoke financial advice.
But Reid told the audience that for 20 years the industry has been trying to look at simplified advice options. The main problem he said is that if something goes wrong at a later stage it is unclear whether the adviser or potentially the employer securing this advice is liable to pay compensation.
He said this problem extends to the introduction of investment pathways, which are now being used as default drawdown options in the contract-based pension market for those who have not sought advice.
“When we were talking to the regulator about the introduction of these pathways I asked the million dollar questions: who is responsible if something goes wrong? I was expecting them to say there would be no problem if you had recommended an FCA-sanctioned pathway but this was not the response.” He said the regulator said there was the possibility of cases being taken to the Pensions Ombudsman at a later stage.
He said that this “too cautious” approach to regulation is creating problems in the industry, and will stifle innovation or moves towards more personalised advice options, as providers will not want to take the risk of paying up at a later date should something go wrong.
“Are we trying to protect people to the point where they take no responsibility for themselves? I think this is the biggest error we’ve made in regulation in the UK. We’ve
got this new consumer duty, which is overarching and picks up lots of different things. So I think if you want to look at the employer market with pensions and look at how they provide some kind of guidance or simplified advice I think you’ve got to be extremely careful.”
He added that in order to get guidance to work the industry needs to get to the point where it has a notion of caveat emptor [buyer beware]. “If you don’t have any responsibility in the individual then all you are building is a claim for the future.”