Jurisdiction(s):
United Kingdom

UK FCA Consumer Duty: Blurred Advice-Guidance Boundary, Compliance and FOS Liability Risks, and Proposed Targeted Support and Simplified Advice Reforms

Published on: 29 January 2024

Published by a Law360 reporter

Legal News

Article summary

The demands of the Consumer Duty introduced by the FCA have blurred the boundary between advice and guidance.

Information presented as free guidance can be taken to mean paid-for advice. Regulatory lawyers say the duty’s insistence on good consumer outcomes, alongside unclear signals from the City watchdog on what counts as ‘advice’, is clouding the compliance landscape for financial advisers. This room for misunderstanding has triggered legal unease about how impartially the Financial Ombudsman Service (FOS) might resolve complaints alleging poor advice under the new consumer protection regime created by the duty. By lifting the compliance threshold and prioritising outcomes, the duty increases the likelihood of advisers slipping up when assisting consumers. A further concern is that advisers, faced with two fresh and potentially conflicting compliance rule books, may hold back from offering constructive guidance or advice. According to Clive Cunningham, a partner at Herbert Smith Freehills LLP, finding the right equilibrium between advice and guidance is now even less clear and more hazardous than before. He also noted the timing of the Consumer Duty, just as the FCA...

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