Explaining its decision to look at this fast-growth part of the market, a spokesperson for the regulator said it recognised the market is going to evolve following RDR and that “where a vacuum appears something will move in to fill it”.
Last year much was made of the advice gap that would be left in the wake of RDR implementation. Consensus was that it would no longer be viable for most advisers to provide their services to clients with less than £50,000 to invest.
At a Portfolio Adviser roundtable held in the final quarter of last year, attended by a cross section of financial services professionals, most agreed this advice vacuum would be filled and suggested execution only (or XO) services would play an important part in this.
The FSA said some of the emerging XO propositions might indeed be part of the movement to service this mass advice market, which has also been largely abandoned by the high street banks.
Learn more about the FSA’s mystery shoppers and the five advice flaws they will look out for.
XO services look to be one of a number of offerings advisers are looking at to cater to this market too.
What constitutes advice?
In its thematic review the FSA will be looking to judge whether businesses are describing their services as non-advised but in fact are providing something that “looks and sounds like advice”.
For example, if an adviser were to say “I am not giving you any advice but if I was in your position and was looking for a product to do what you want it to do, I would get that one” he would be saying to a consumer this is the right one for you, the FSA said.
The consumer might think they had been advised, the regulator’s spokesperson said, and if you surveyed them as they came out they might say they were told it was not advice but that it felt and sounded like it.
“When we are conducting these thematic review we always start with ‘what does the consumer understand and what do they experience?’
Intrusive approach
“At the moment we are still scoping out what the thematic review will look like but we are not ruling anything out at this stage and we have certainly said mystery shopping is something we will use more of in the future,” the spokesperson concluded.
Mystery shopping played an important role in the regulator’s review of six high street banks’ advice services and is an example of what will be a more ‘intrusive approach’ to supervision under the FCA.
Currently the FSA is carrying out three other thematic reviews covering adviser charging, description of service (independent or restricted) and professional standards data (whether advisers are qualified to the level they say they are).
