The regulator has said it understands advisers' concerns about their liability for simplified advice, saying it has made the issue a core part of the Financial Advice Market Review (FAMR).
Speaking at a work and pensions select committee hearing on 16 September, director of strategy and competition Christopher Woolard told MPs the regulator recognised advisers could be fearful of shouldering total liability in advice solutions that focus only on specific client needs.
He said the Financial Conduct Authority (FCA) would seek to clarify to what extent advisers are liable when giving focused advice, in its joint market review with the Treasury.
However, he said it was unlikely the FCA would consider removing liability for 'simple' advice solutions altogether. "That feels like a step too far," he said.
Currently advisers are liable for the advice they give, be it on a fully-advised or simplified basis.
MPs grilled Woolard and FCA policy director David Geale on why the regulator had failed to create an environment allowing advisers to offer low cost services to retirees with small pots.
The committee argued advisers were understandably scared of taking full liability for their advice ten years into the future, and suggested the FCA should explore a safe harbour for advice on the smallest pots.
Many consumers were given full access to their pension pots for the first time in April, under recent government reforms, exposing them to more complex products and decisions.
The Treasury and FCA launched a review of the advice market in August to explore how regulation can help create better access to advice for the mass market.
Woolard said: "Within our existing rules there are various options where you can give limited or restricted advice.
"Those are not always well understood as options by advisers and there is a degree of fear around, 'well even if I thought I was giving limited advice will there be some form of liability that follows on from that?' We understand these sentiments."
Woolard said the FCA would need to consider clearer and simpler options from both the consumer and adviser point of view, within the FAMR.
"But there is a further jump behind that to create a safe harbour where if you give someone advice and charge for that in some way and yet not take responsibility for that advice given and that feels like a step too far.
"But there is a lot we can do listening to those concerns to come up with something to help consumers and the advice community."
MPs urged the FCA to "act now" to help people who are already accessing their pots.
But Woolard said there was evidence people with small pots were successfully navigating their way through the available guidance services. He said he recognised the FCA had to look at how it could make the journey better.
He also said the FCA was looking to make the distinction between advice and guidance clearer as part of its work on FAMR, to be absolutely clear where liability lies.
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Sent to retirement savers at age 50