The Treasury today asks whether people working in Citizens Advice Bureau or other "voluntary advice centres" should be exempt from rules regulating profit-making businesses in order to widen access to financial advice.
The question comes in consultation papers published by the Treasury as part of the two-year review of the Financial Services and Markets Act, which will result in amended secondary legislation.
Evidence is cited in the documents that advice centres must take an overly cautious approach to helping consumers with pensions, mortgages and endowments because of fears of the consequences of offering “misguided financial advice”.
However, the Treasury says in cases where debt issues are pressing, even flawed advice is better than offering no advice at all.
”Where uncertainty about the effect of legislation causes advisers to be too cautious about the advice that they give, this could compromise the debt advice services offered to clients who often require urgent specific advice. In these circumstances, some advice (even if slightly flawed) may be better than no advice at all,” the department writes in Volume 1 of the consultation documents.
A complimentary proposal is for rules to be changed that currently differentiate financial promotion and regulated activities.
Voluntary advice centres are not registered by the FSA for conducting regulated business because their services are offered free on a not-for-profit basis to consumers, the Treasury states.
However, in light of FSA moves to also regulate mortgages and other areas of business, the Treasury asks whether it might be better to implement new legislation creating a specific exemption for not-for-profit organisations, which would remove uncertainty about responsibilities under the current regime.
The Treasury proposes three criteria that must be met for gaining exemption for such advice centres. They must:
Besides an exemption on advice pertaining to mortgages, pensions and endowments, the consultation proposes extending this to shares and gilts too.
”If it were decided to create additional legislation confirming thatadvice centres are not carrying on regulated activities, one option would be to include a provision in the Exemption Order exempting advice centres from the regulated activities of advising on and arranging investments.”
”This could be made subject to similar conditions to those contained in the new financial promotion provision. Another option would be to make changes to the Business Order.”IFAonline
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