FSA sets out basic advice model for stakeholder products

FSA proposals for a simplified, low-cost advice regime were published last month on the day when the Government announced which stakeholder products it would cover.The stakeholder range is the cash deposit (a form of cash ISA); the medium-term investment product (either a collective investment scheme or a unit-linked life product); the smoothed investment fund; the stakeholder pension; and the Child Trust Fund. FSA’s consumer testing has persuaded it to retain the tenet of ‘suitability’ in a sales process that will work from a script written by authorised firms. Customers would have to be asked about issues of risk, savings goals, major financial priorities and affordability in the light of any existing debt obligations.Although stakeholder sales staff would not be required to pass financial planning examinations firms would need to ensure that they were competent to give basic advice through training and supervision.The customer would receive a record of the sales interview setting out the responses he or she gave that led to the specific advice. Complaints would be covered by the Financial Ombudsman Service. The consultation ends on 10 September 2004 and the new regime is expected to operate from April 2005.