Firms offering streamlined advice must be careful to obtain and understand "all the essential facts" to make sure they provide a suitable recommendation to clients, the Financial Conduct Authority (FCA) has warned.
Despite offering a narrower scope, streamlined advice services will not allow firms to lower the level of protection due to clients, the FCA warned in its guidance consultation on the matter out on 11 April.
However, the FCA said firms giving the service may not have to perform an analysis of all a client's circumstances.
They will be expected to have a "reasonable basis" for believing a recommendation meets a client's investment objectives, is suitable for the client, and that the client has the necessary experience and knowledge to understand the risks involved.
Nevertheless, assessing a client's suitability remains a "core element" in offering a personal recommendation through streamlined advice the regulator said, adding firms should avoid indicating to the client they can "self-assess" their suitability, such as in online services.
Neither should they "create any ambiguity or confusion about their responsibilities in the suitability assessment process", it warned.
It said: "Since a firm must take reasonable steps to ensure that any personal recommendation given to the client is suitable, the firm may wish to take the step of asking the investor to expressly acknowledge the nature and extent of the service rather than relying solely on disclosure."
It added: "Some financial products are unlikely to be appropriate for a streamlined advice process because of the amount of information likely to be needed by the firm in order to make a suitable personal recommendation to a retail client.
"In general we would expect that the more complex, highly concentrated or illiquid the product, the more likely it is that firms will need more information about the client's broader portfolio in order to meet the firm's suitability obligations."
Firms should also monitor who is using the streamlined service and take relevant action if consumers are receiving unsuitable personal recommendations, the FCA said.
To guide firms the FCA provided examples of both good and poor practice of streamlined advice, as well as questions firms should ask themselves if they are considering to offer a streamlined service.
The guidance, a result of a recommendation in the Financial Advice Market Review, is intended to help firms offering streamlined face-to-face advice as well as robo-advice services, with the regulator claiming its rules were "technology neutral".
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