Providers warn FSA rules make simplified advice unworkable

Simplified advice will be unworkable unless Financial Services Authority rules around adviser qualifications are relaxed, according to the Association of British Insurers (ABI).

Speaking at the Future of Distribution in Financial Services conference, Paul Yates, strategy and product development director at Avelo and Maggie Craig, director of Life and savings at the ABI, said rules seeking to protect the consumer had made simplified advice impossible.

Craig (pictured) said the ABI was still fighting for a relaxation of the rules to allow the creation of a totally automated process, where the adviser provides only an explanation of the process.

‘People like people. They do not have the confidence to do it alone. It has to be automated service but they need handholding. But if you say the person doing that needs to be fully qualified that does not seem reasonable.

‘Many years ago providers did work on transferring people out of defined benefit schemes using an automated system .The advice would not be able to change the recommendation, only explain the terms to the client, such as “commutation”. I accept there would be risks but there are risks in every part of life.’

Yates said the FSA rules would hinder saving and encourage execution-only businesses.

‘We have looked at simplified advice and it’s very difficult to make work. For example, if you look at whether to join the National Employment Savings Trust, on the simplified rules if the client has any debt it would look like you should tell them not to join.

‘I can see a lot of people go down the non-advised route. They look at Hargreaves Lansdown and how that is working and want to do the same. The regulator won’t like it but it is making it difficult to give advice. So simplified advice does not look like the route to go down.

He added a new breed of mass market consumers had begun to seek out financial products and were in danger of making poor choices.

‘People expect technology to make it easy, but there is a difference between what they think they want and what they need…How do we fix this? Face to face is difficult to do economically and the public are unwilling to pay.’