FCA clarity on advice versus guidance issue would have 'immediate impact' on platforms innovation, says expert

Out-Law News | 14 May 2014 | 10:23 am | 1 min. read

Retail investment platforms could immediately revolutionise their services if the City regulator gives clarity to those businesses on whether their provision of certain information constitutes investment advice or merely guidance, an expert has said.

According to a recent report by the Financial Times, the Financial Conduct Authority (FCA) will next month publish a new consultation document that will try to explain whether information published by platforms constitutes advice or guidance. The issue is important as the provision of retail investment advice is heavily regulated and subject to strict rules governing how those services can be paid for.

"The industry has been waiting with baited breath for some time for any more information from the FCA about its views on advice and guidance," platforms expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law.com, said. "Guidance provided online has been on the increase and the current breadth of opinion across the industry on where this crosses over into becoming regulated advice means that further clarity and direction from the regulator is bound to have an immediate impact."

"Many providers have been holding back propositional changes awaiting further guidance and they will be hoping that this consultation will give enough indication of the FCA's views to allow them to move forwards. Any sense of a softening of the regulator's stance could lead to a flurry of activity from firms that are trying to fill the advice gap online, but that have not been confident enough of the possible reaction of the FCA," Ashby said.

There are currently a number of different kinds of platforms on the market. Some platforms are used by financial advisers on behalf of their clients, whilst others allow consumers to invest directly with them. The 'direct to consumer' (D2C) platforms display a range of information and deploy a number of tools to help individual users complete the process of selecting financial products in which to invest, and it is this provision of information that there is a lack of clarity around.

In March, the FCA said that use of tools that present information to investors about trading decisions taken by fund managers and which allow those investors to match those fund mangers' trades could constitute the provision of investment advice.