FCA plans review of advice-guidance boundary

Alex Sword


The Financial Services Forum

The FCA is planning to reform the rules distinguishing ‘advice’ from ‘guidance’ to offer more support to mass market consumers.

Executive Director for Markets, Sarah Pritchard, said that the regulator would be conducting a “holistic review” into the boundary between the two.

The review will be carried out ahead of the introduction of the FCA’s greater rule-making powers under the future regulatory framework legislation.

Pritchard said the new plans dovetailed with the existing Consumer Investments Strategy, which includes plans to introduce a simplified advice regime for mainstream stocks and shares ISAs where the risks to consumers are low.

The FCA’s goal is to reduce the regulatory burden for all advisors, while allowing firms to reduce charges and make advice more accessible to mass-market consumers.

“The weight of regulation should be commensurate with the level of risk but moving away from the one-size-fits-all approach mandated by MiFID will be complex and it will need assistance and input from industry,” said Pritchard.

Under the MiFID rules, “advice” is considered “a service which recommends a specific course of action based on consumers’ individual circumstances and goals”, while “guidance” provides more general information without recommending a specific product. Advice falls under legal protection, with advisors responsible and liable for the recommendations they make.

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