Firms providing information/guidance close to the advice boundary may feel a little more protected if a claim is brought before the court, which, often unlike Fos, looks foremost at the contractual terms between the parties as to what the party agreed to do.
A recent example, again after the paper, is Shokrallah-Babaee v EFG Private Bank where the claimant argued that the bank owed it an advisory duty in a mortgage transaction, but the court found the defendant was not advising the claimant about the merits of the mortgage arrangements and that it was treating the claimant as an execution-only client.
What next?
This is not the first time the FCA has looked at the advice gap; it has previously introduced robo-advice (but only 1.5 per cent of UK consumers used that in 2022) and the idea of simplified/restricted advice is not new.
But to what extent these new ideas will be supported by the industry is entirely unknown. Responses to the paper are due by February 28 2024.
The big issue for firms, if the FCA introduces the ideas in the paper, is whether it impacts the risk to complaints when compared against the commercial impact of providing the type of advice outlined in the paper.
The paper seeks to balance the need for advice to be more widely available with this concern.
The paper implies that if firms follow the FCA handbook when it comes to the types of information that must be obtained to provide these lesser forms of advice, and are able to evidence that, then if a specific piece of information that they did not ask about would have led to a better outcome, the customer's ability to complain "could be lessened" – however lessening a customer's ability to complain is not removing it entirely.
If these ideas are introduced into the regulatory framework, the big unknown for firms will be how the Fos applies the concepts if customers end up regretting decisions.
The difficulty for firms is that the Fos does not have to follow the law and can make decisions on a fair and reasonable basis – it rarely tests the evidence of a complainant by way of a hearing and the risk before Fos may well prove, as a result, a bar to firms entering the area of simplified or targeted advice.
The uncertainty at the Fos is also particularly acute at present following the introduction of the consumer duty in July 2023, which requires FCA-regulated firms to act to deliver good outcomes for retail customers.
A Fos decision applying the new consumer duty is awaited.
