FCA gives firms latest guidance on advice

By Moriah Costa on 2nd August 2017

Robo-AdviceEquity Crowdfunding

The regulator has published a report that answers questions from firms looking to automate investment advice.

The regulator has published a report that answers questions from firms looking to automate investment advice.

The Financial Conduct Authority has provided firms with more clarity on what constitutes financial advice, as it hopes to encourage firms to use more technology.

Many questions raised by the 17 firms that worked with the FCA were around suitability. In one case study, a firm asked if it could direct a client to an online automated advice service, which the FCA says would be allowed as it would not be personal advice.

The FCA told one firm that it would have to identify clients with a zero risk tolerance. Other issues raised by firms included the use of best buy lists and personalised communications such as ISA allowance increases.  

In its Financial Advice Market Review published Tuesday, the regulator also suggested that the Treasury change the definition so that it is based on providing a personal recommendation. The Treasury has already announced that it would change the definition in January 2018.  

The suggestion is based on feedback from firms telling the regulator that they felt they were discouraged from giving customers financial information in case they inadvertently gave advice. The FCA also plans to publish a handbook to give companies more guidance.

Robo-advice can be a somewhat misleading term, as only Independent Financial Advisors can give specific advice. Most digital platforms just offer guidance about the various investment options available.

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