The regulator will not introduce a mandatory standardised fact find process, despite industry concern about the cost of assessing client suitability.
The Financial Conduct Authority (FCA) said it had consulted with a range of firms and trade bodies in its work on standardising client information but had concluded the challenges involved in designing an effective process outweighed the potential benefits.
Firms had told the regulator as part of its Financial Advice Market Review (FAMR) they would value more clarity on the extent to which they could rely on ‘standardised' client information from third parties to help them make a suitability assessment.
They suggested this would help reduce some of the costs associated with providing advice, while still ensuring that any recommendation is suitable for the client. It would have the potential to make advice more affordable and more attractive for consumers who might previously have been daunted by the process, they said.
The regulator said in its guidance consultation out on 11 April advisers were free to use pre-completed fact finds as long as checks were in place ensuring the information given was accurate. This could mean getting the client to review the information or to build controls into an online process.
So long as firms are satisfied that they have taken all reasonable steps to ensure the accuracy of client data, this could be provided through the client, a product provider or other third party, the FCA said.
However, the regulator stopped short of introducing a blanket fact find questionnaire for all.
It said: "We have considered the possibilities for standardising the information collected by firms for the purposes of giving a personal recommendation and have consulted with a range of firms and trade bodies.
"Given the challenges of designing a standardised proforma for the qualitative elements of the fact find and the high existing levels of consistency in the objective elements of fact finds, we do not intend to introduce a mandatory standardised fact find at this stage."
'Objective' and 'qualitative' fact finds
The FCA divided fact finds into two categories: the 'objective' information about the client and the ‘qualitative' part.
The objective part contains information already broadly standardised in the market, such as the client's name, address and occupation.
The qualitative work, however, includes information such as the client's level of knowledge, previous investment experience, and attitude to risk. This presented greater challenges for any standardisation as firms were using different methodologies to collect the information, the FCA said.
"So, a firm that uses a question and scoring system to analyse their clients' attitude to risk will collect information in a format that supports that process. Information collected in this format might be of limited value to a firm that assesses attitude to risk using a different methodology, such as psychometric testing," the FCA said.
"In those areas where the format and content of the fact find are determined by a firm's internal processes, it is difficult to prescribe a universal fact find without also requiring that firms adopt similar processes which we consider would be disproportionate to any benefit that might be achieved."
Advisers have until 11 July 2017 to respond to the consultation. Meanwhile, the regulator is also consulting on guidance for streamlined advice and factsheets for employers and trustees.
A second consultation on handbook changes, non-advised services and experiences gained by the FCA's advice unit will be issued in the summer.
The regulator aims to publish its response to part one in September, followed by part two in December. It aims for the package of measures to take effect in January 2018.
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