The disclosure requirements proposed for restricted advice in the latest RDR consultation paper need to go further and require firms to use a mandatory form of words in their initial disclosure information, says Skandia.
The FSA is proposing to make a distinction between independent and restricted advice and Skandia has said it agrees that short, one sentence descriptors that compliment these labels will help consumer understanding of the advice being provided.
However, it believes the FSA should mandate a precise form of words that firms must use in their documentation to describe the services they provide in order to ensure consistency across different firms and deliver clarity for consumers.
Consultation paper 09/18, Distribution of retail investments: Delivering the RDR, proposes that firms offering restricted advice will be required to provide oral disclosure using a specific form of words that will include the name of the firm they work for and the range of products they advise on.
This requirement should be extended, said Skandia, to the formal initial disclosure documentation given to the customer to take away and read in detail to ensure the disclosure is consistent across each case. Verbal disclosure can not be monitored effectively.
Skandia also believes that basic advice should be phased out because it is unlikely that it will be clear to consumers how this is different from a simplified advice process. Skandia welcomes the proposal for professional standards and adviser charging to be consistent across the entire advice channel.
Peter Mann, chief development officer at Skandia, comments: "The distinction between independent and restricted advice provides plenty of opportunity for each type of adviser to clearly differentiate their offerings, with independent financial advisers continuing to offer the most valuable service to consumers.
"There are still many issues that will need to be ironed out, particularly the disclosure requirements for the various types of advice. If consumers are ever going to understand the differences between independent and restricted advice we need formal sets of disclosure statements that are consistent across firms in each category and provided in writing to consumers."
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