FSA to implement basic advice: but further work on Smoothed Investment Fund
21/10/2004
The FSA announced today that it will implement the basic advice regime in support of the Governments proposed stakeholder products initiative, with effect from April 2005.
However the FSA's consultation and consumer testing of basic advice has highlighted some concerns regarding the proposed Smoothed Investment Fund (SIF), and consequently the FSA will not include it in the basic advice regime at this stage
Dan Waters, FSA Director of Retail Policy, said:
"The FSA supports the aim of making it easier for all consumers to have access to stakeholder products and we are committed to developing a sales regime that will achieve this without compromising consumer protection. Since we published CP 04/11 in June we have conducted further research on the basic sales approach and the outcome of this gives us confidence that basic advice will allow most stakeholder products to be sold simply and cheaply to consumers in a way that could result in significant benefit to consumers.
"The research also showed, however, that while most consumers could understand in simple terms the concept of smoothing, the differences between the smoothed and unsmoothed stakeholder products were harder to get across. We remain concerned about the additional layer of complexity that smoothing represents in the context of basic advice, and the extent to which the benefits and risks involved can be explained to consumers in a balanced way in that process. We intend therefore to conduct further research based on examples of the smoothed investment fund that providers would propose to offer to prospective customers. Once that research is complete, the FSA Board will consider the question of the inclusion of this type of product in the basic advice regime."
Notes for editors
The FSA plans to publish in early November its Policy Statement in response to the CP 04/11 consultation. This will cover the findings of the third wave of research undertaken since the CP 04/11 and our overall position on the basic advice process including the conclusions on the Smoothed Investment Fund.
CP04/11 is available on our Website
The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.
The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.