British financial advisers could be split into two categories under proposals from the Financial Services Authority (FSA).
The FSA has suggested a two-tier retail investment advice market would improve professionalism standards, make advice more affordable and increase consumer confidence.
The United Kingdom regulator is seeking industry feedback on dividing the market into “professional financial planning and advisory services” and “primary advice”.
Professional, or the most highly-qualified, financial planners would operate on a strictly fee-for-service remuneration basis.
The FSA would not allow planners who accepted commissions to call themselves independent.
“The FSA would then seek to address the risks of lower professional standards and potential conflicts of interest through increased regulatory requirements,” it said in a statement.
“This would provide regulatory incentives to all firms to operate with higher standards.”
A broader consumer audience would be serviced by the “primary advice” tier.
This would provide cheaper, straightforward advice on simple products.
“Tackling the root causes of the problems within the retail investment market is a challenging and complex issue and is not something that can be solved overnight,” FSA retail markets managing director Clive Briault said.
“We will play our full part in continuing to facilitate and enable market-led change.”
This is the first proposal announced from the retail distribution review discussion paper released in June.
The six-month consultation period ends on December 31.
