The head of the City regulator has warned financial services firms that his organisation will not allow simplified advice for individual investors to turn into the next mis-selling scandal

May 29, 2014 4:24 pm

Simplified advice won’t become mis-selling, vows regulator

By Emma Dunkley

The head of the City regulator has warned financial services firms that his organisation will not allow simplified advice for individual investors to turn into the next mis-selling scandal.

Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), told a Bloomberg conference that the regulator will provide guidance to financial firms helping clarify the boundaries between investment products sold with advice, and those sold with just guidance.

The watchdog will also launch an industry consultation next month on “big ticket, advice-related challenges,” to seek feedback on new types of automated and simplified financial advice emerging in the wake of the retail distribution review (RDR), which introduced new rules for financial advisers.

“This work shouldn’t be mistaken by firms as any kind of charter for either mis-selling or abdicating responsibility,” warned Mr Wheatley.

The initiatives follow mounting concern over the lack of a clear regulatory distinction between firms offering financial support or “guidance” and those who provide full advice.

More online investment “guidance” websites have come to market in the past few years, filling a gap for investors who cannot afford full financial advice but who lack the knowledge, confidence or time to invest themselves.

Mr Wheatley said the issue over how companies provide support or advice without “bumping up against the regulatory rule book” is the “most pressing and immediate” challenge.

“Where are the frontiers between ‘execution only’ on the one hand, full advice on the other? Is there more room for firms to offer investment advice that’s limited or focused to a specific consumer problem?” said Mr Wheatley.

Investors who have received formal investment advice from a regulated firm have more recourse if things go wrong than those who have received only guidance.

They can claim compensation or demand restitution if the advice proved to be unsuitable for their particular circumstances. Those who receive only guidance – receiving a list of suggested funds after completing an online questionnaire, for instance – do not enjoy this protection.

Chris Williams, chief executive of WealthHorizon, a new online investment site, said: “Clients’ needs are often very simple and these need to be met first, with additional augmented advice delivered as and when it is needed.

“The industry, with the support of the FCA, needs to start exploring the middle ground.”


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: