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22 September 2016

The Financial Conduct Authority (FCA) will publish guidance to help firms, following a change to the definition of advice.

Earlier this year the Financial Advice Market Review (FAMR), a joint review by the FCA and Treasury into how to make advice and guidance more accessible, proposed redefining advice. The new definition would mean advice has not been given unless a personal recommendation has been made.

Any guidance being provided therefore could not stray into advice unless a personal recommendation is made, and it was suggested this would make it far easier for firms to offer guidance. The rule change will put the definition of advice in line with that used in European Mifid rules.

The Treasury has now published a consultation on the measure asking for feedback.

It said that in response to the FAMR consultation firms said newFCA guidance would be needed to set out the regulatory responsibilities of how firms design and deliver guidance.

The Treasury said that as a result the regulator will ‘produce new guidance to support firms offering services that help consumers to make their own investment decisions without a personal recommendation’.

This will include a series of ‘illustrative case studies’ developing guidance services and dealing with specific areas of uncertainty identified during the review.

The Treasury also acknowledged there was a ‘small risk’ that unscrupulous firms may attempt to use guidance services to distribute products, without being subject to regulation.

Where guidance is related to a regulated product, the Treasury said, there are already restrictions in place, relating to inducements, promotions and signposting, that would mean the firm’s activity is captured by regulation.

Steven Cameron, regulatory strategy director at Aegon said:’ The next step will be coming up with descriptions of advice versus guidance and that will bring these concepts to life for consumers and show customers they will get with paid-for advice versus guidance.

‘The FCA says it will work with firms to help them design guidance services and I think that is helpful.’

By David Petty

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