Where Now for Simplified Advice? (Article by Rahul Odedra in Professional Adviser on 09.02.2012)

The FSA touted it as the solution to the mass market problem, but will simplified advice be declared dead before it even gets off the ground?

The Financial Services Authority (FSA) is struggling to get providers on board with simplified advice, an industry expert has warned, leaving the mass market advice problem potentially unresolved.

The regulator published a guidance consultation last year outlining its definition of simplified advice and the various versions which providers and distributors could opt for (see box below).

He said: “It hoped that the industry would come up with some models which would create the right customer outcomes but not much progress has been made and no one’s come up with anything that would work.

“The RDR fee model strikes particularly hard at people with modest sums to invest, and that’s the target market for simplified advice.”

David Ingram, founder of provider consultancy Aim Two Three, agreed there had been little interest in simplified advice among providers and he identified their key concerns.

“While the FSA and Ombudsman sit back and say simplified carries the same regulatory requirements as full advice, why would anyone want to provide it?” he asked. “They’re asking people to take too 
much risk.”

The middle ground

Although he has put his own attempts on hold, Keith Churchouse, director of Chapters Financial, still feels there is a future for simplified advice and believes the industry will see a similar evolution to the general insurance market, where online aggregators now make up a large part of the market.

“It will fill the middle, post-RDR, ground and my belief of that has not changed in any way, shape or form,” he said.

“I think it does work but it needs a volume marketing approach, possibly from a bank, supermarket or large-scale distribution model.”

Kerr also believes simplified advice could thrive, although he remains unsure about whether financial advisers would want to get involved.

“What the profession should be doing is trying to work out how they can combine technology with advice at a much lower cost than the current models.

“However, it’s not really where intermediaries want to play as they would much rather focus on people with more wealth. With their qualifications and experience, it would be like a brain surgeon being asked to cure a nose bleed.”