FSA warns exec-only platforms over accidental advice
27 Sept 2012

The Financial Services Authority (FSA) is scrutinising the execution-only platform market to ensure platforms do not inadvertently stray into giving advice.

Speaking at the FSA Asset Management Conference, FSA technical specialist Rory Percival warned firms developing execution only platforms that while they should provide customers with sufficient information, they must be careful not to give advice.

He said there was higher risk of giving advice through more complex platform offerings.

‘A lot of the execution-only mechanisms we see today are not as simple as “here is a list of products and funds, take your pick”,’ he said.

Percival (pictured) said some execution-only platforms included information on the risk appropriateness of products and risk profiling tools to help consumers, which were fine provided such information did not crossover to imply advice.

‘Firms do need to be careful,’ he said. ‘The way they structure that could be that they put all this information together and it could turn out to be an advised process in mistaken form.

‘One easy test is if it looks and feels like advice than it probably is advice from a consumer’s point of view.’

Percival said a growing execution-only market was not seen as bad outcome of the retail distribution review (RDR) by the FSA who’s role was not to shape the future advice market but to implement rules to ensure better consumer outcomes

‘We thought about the implementation of RDR and this was one part of the market we thought would develop further in light of the general shift. And we have been looking at it a lot more recently. [The FSA does not see it as] a risk, it’s a market development.’

‘We don’t have problems per say with execution-only becoming more a more popular form of distribution. Obviously, there are a number of concerns and risks that will fall out of that development. One is that the main onus is around disclosure.’