We consider the progress of the FCA’s Advice Unit as well as the most recent proposed guidance on insistent clients
Advice Unit
Back in March 2016 the Financial Advice Market Review (FAMR) recommended the FCA set up a dedicated team to help firms develop and deliver mass-market automated advice models more quickly. As a result, the Advice Unit was established in May 2016.
It provides regulatory feedback to firms that aim to deliver lower-cost advice, discretionary investment management services to consumers. So far it's opened two tranches of applications from firms and approved 17 requests.
Initially the Advice Unit was open only to propositions that aimed to cover gaps in the market as identified by the FAMR, namely:
- Pensions (accumulation & decumulation)
- Investments
- Protection
However, it's since been expanded to also include propositions from firms in the mortgage, general insurance and debt sectors.
Firms that meet the eligibility criteria can request regulatory feedback from the Advice Unit to help where existing rules and guidance provide insufficient detail. Within the Consultation Paper (CP17/28) there are case studies along with questions from those firms within the first two tranches, and the regulator's response.
Insistent clients
The term 'insistent client' is used to describe an individual who has received a personal recommendation but chooses to do something other than follow the adviser’s personal recommendation. The proposals in CP17/28 are designed to increase confidence for advisers and providers when dealing with insistent clients.
The guidance is a follow-up to FCA factsheet 35, which proposed three key steps to dealing with insistent clients, expanding it to a five-step process in CP17/28. The steps are:
- Ensure the original advice complies with the requirements for giving a personal recommendation.
- The adviser has communicated clearly what their recommendation is and the reasons for their recommendation.
- The adviser clearly communicates the risk of the alternative course of action proposed by the client and why they have not recommended it.
- A clear distinction is made between the advice that is being acted against and any subsequent or concurrent advice. This might be achieved through distinct suitability reports.
- The adviser keeps a record of the process followed and the communications to and from the client that makes it clear that the action is against the personal recommendation at the client’s request. Best practice would be for a record of the client’s intention to proceed against advice to be in the client’s own words.
Back in August we focused on the changes to the definitions of guidance and advice ahead of their implementation on 3 January 2018. You can read this article here.