Read examples on providing consumers with greater levels of support, including getting closer to the advice guidance boundary for giving a personal recommendation.
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How to use this information
In 2022, the Government announced plans to fundamentally review how the boundary between advice and guidance on investments is operating. This review will be carried out by the FCA, in conjunction with the Treasury, as part of the Edinburgh Reforms.
The review is a substantial piece of work that will take time. In the meantime, we encourage FCA-authorised firms to provide greater levels of support for consumers making investment decisions. We, therefore, remind firms of how the advice boundary currently operates. By building greater confidence among firms to operate closer to the relevant boundary, we hope to improve access to investment guidance and advice for consumers.
This information highlights the different ways FCA-authorised firms can support consumers under the existing regulatory framework, drawing from existing rules and guidance, pending any changes that might be implemented following the review.
The information on this page does not represent any change to regulatory requirements.
We set out examples of where firms, authorised and regulated by the FCA, can support consumers without inadvertently providing a personal recommendation. These examples also consider firms’ new obligations under the Consumer Duty, which came into force on 31 July 2023 for most products.
Why the right support for consumers matters
We want to see more consumers invest with confidence, understanding the risks they are taking and what regulatory protections apply. We want consumers to be able to get advice or support when making their investment decisions. The Financial Lives Survey 2022 estimates 4.2 million UK adults with at least £10,000 held mostly or entirely in cash, have some appetite for investment risk. These people might benefit from support to do more with their money than leave it in cash.
Additionally, 2015 pension freedoms give consumers more potentially complicated decisions to make about their pension savings. Accessing the right support is crucial to enable consumers to make informed investment decisions; and consumers who receive this support are more likely to invest.
We believe some FCA-authorised firms may be hesitant to provide help to consumers due to an overly cautious interpretation of the current regulatory framework, and because they are concerned about the regulatory requirements that apply if they provide a personal recommendation. As a result, firms may be providing less help than they could. This could lead to consumers suffering harm that might have been avoided if they had received more support or information from their firm.
Understanding the advice boundary as it applies to a regulated firm
Whether or not any support given to a customer amounts to advice is generally only relevant to persons who are not appropriately authorised by the FCA (see PERG 8.24). Generally speaking, if a person who is not FCA-authorised gives investment advice, they are acting in breach of the general prohibition in section 19 of the Financial Services and Markets Act, which is an offence.
For FCA-authorised persons, the relevant boundary is not the giving of advice, but the giving of a personal recommendation. This is because, broadly speaking, as a result of the reforms introduced following the Financial Advice Markets Review, an FCA-authorised firm only gives investment advice if the advice amounts to a personal recommendation.
What is a personal recommendation
A personal recommendation is a recommendation made to an investor or potential investor in relation to a security, structured deposit, or a relevant investment that is presented as suitable for the person to whom the recommendation is made, or is based on a consideration of that person’s circumstances. The definition excludes a recommendation issued exclusively to the public (see PERG 8.30B.2G).
When advice or support is not a personal recommendation
Investment advice that falls short of a personal recommendation is governed by the same high-level standards as apply to investment guidance and other more general communications between a firm and its customer, notably the new requirements under the Consumer Duty, but also existing high-level requirements in COBS, (eg the client’s best interests rule and the fair, clear and not misleading rule).
Some support given to a consumer will not be a personal recommendation if it is not investment advice to begin with. For example, a communication will not be advice if it is:
Further examples of support which isn’t a personal recommendation
Other forms of support an FCA-authorised firm may give to a customer may involve the giving of advice but without amounting to a personal recommendation. As noted above, advice that is not a personal recommendation is subject only to high-level requirements, for example, the clear, fair and not misleading rule and the Consumer Duty, and not to the detailed rules that apply to the giving of personal recommendations.
A firm does not give a personal recommendation if the recommendation is issued exclusively to the public, even if all other elements of the definition are met.
This could include ways for its customers to avoid extra costs or charges; prevent or mitigate investment losses; enhance their gains under particular market conditions; or earn more interest. The publicly issued communication would not be a personal recommendation unless it is also issued to one or more particular individuals.
Another way a firm can help the customer without giving a personal recommendation is by making clear to the customer (where this is true and not unfair to the customer) that it has not asked the customer enough information to determine whether a particular investment decision is suitable for them.
An appropriately and fairly worded disclaimer may help a firm to avoid inadvertently presenting investments as suitable for particular customers or as being based on a consideration of the customers’ circumstances (see PERG 8.30B.21G).
Interaction with the Consumer Duty
Firms need to understand the current regime not only so they can do more to help consumers, but also because the Consumer Duty requires firms to enable and support retail customers to pursue their financial objectives (PRIN 2A.2.14R) and avoid causing (by act or omission) foreseeable harm to retail customers (PRIN 2A.2.8R and PRIN 2A.2.9R).
As we have set out in our Consumer Duty implementation letters on implementing the Consumer Duty in the consumer investments and life insurance sectors, firms should not be reticent to provide appropriate support to consumers dealing with complex products or decisions simply because they are being overly cautious about giving regulated financial advice.
Further examples to help firms understand better where we expect them to comply with the Consumer Duty and where they can do so in a way that doesn’t amount to providing a personal recommendation:
We have spoken to the Financial Ombudsman Service. It has confirmed that in deciding what is fair and reasonable in all the circumstances of a complaint, this note would be one of the things that it will take into account if a customer brings a complaint on providing further support based on the examples above.
Other available resources
FCA Innovation Hub
Innovation Pathways supports firms that are developing automated advice and guidance models across a range of sectors. These include incumbent banks and insurers, as well as challenger firms that are new to the market. Support includes:
- helping businesses to understand our regulatory regime
- supporting firms serving gaps in the advice market, identified by the Financial Advice Market Review.
We continue to provide regulatory feedback to firms developing automated models to deliver lower cost advice and guidance to consumers.