MorganAsh managing director Andrew Gething says consumers’ financial capability must be taken into account following reports in The Telegraph that banks and brokers will be allowed to push their own investments to millions of people.

The Treasury is reportedly considering asking the Financial Conduct Authority (FCA) to regulate financial guidance, including introducing a level between advice and non-advice.

The government hopes the move will allow more people to invest and make better financial decisions – by using a service that is a fraction of the cost of full financial advice.

However, many have raised concerns about what consumer protections will be in place if millions of consumers are marketed investments by firms trying to sell their own products that may not be suitable.

A Treasury spokesman said no decision has been made just yet, but that it and the FCA will outline proposals in a policy paper later this year.

Gething says that the determination of advice or non-advice must take into account the consumers’ financial capability.

This forms an important part of a client’s vulnerability assessment, now required under Consumer Duty.

He adds: “The big problem between advice and non-advice has been the lack of understanding of the consumer’s financial capability.

“It is fine for a financially astute person to undertake their own transactions, but it is not in the consumer’s interest for someone with minimal financial knowledge to self-serve.

“Vulnerability assessments now help to overcome this with the requirement to include an assessment of the consumer’s financial capability.

“While some firms just include this within a ‘resilience’ category, certain tools can assess and record it separately.

“Firms who provide both advice and non-advice are already using this to triage which consumers are suitable for which approach.

“This method allows for the trigger to be different for different products and circumstances.

“It will be relatively easy to extend this to include which clients are suitable for guidance, advice and non-advice and to be able to monitor the success of this over time, and any resultant consumer harms.

“These are all important elements in ensuring compliance with Consumer Duty regulations.”

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