Investment platform AJ Bell has called on the Financial Conduct Authority (FCA) to clarify the advice/guidance boundary in order to make the new Consumer Duty effective.

Yesterday was the deadline for responses to the FCA’s latest Consumer Duty consultation paper.

Firms need to have confidence to communicate with non-advised customers without straying into advice for the Duty to be effective, the platform said in its response.

Tom Selby, head of retirement policy at AJ Bell, said firms’ ability to offer guidance to help non-advised customers is constrained by a lack of clarity around the boundary between guidance and advice.

He said the new Consumer Duty provides the perfect opportunity for the FCA to provide the necessary clarity.

He said: “Providers like investment platforms, who have an existing relationship with their customers, are often in the best position to offer ongoing guidance to help savers make good decisions and avoid poor decisions.

“But firms’ ability to offer this help is constrained by a lack of clarity around the boundary between guidance and advice. Firms often have a very limited appetite for intentionally or unintentionally breaching perimeter guidance, which stifles innovation in the provision of support to customers.

“This issue needs to be debated and addressed during the consultation phase if the Consumer Duty is to work as intended.”

AJ Bell also called on the FCA to give firms flexibility in how they implement Consumer Duty.

Mr Selby said: “The Consumer Duty clearly aims to move the market to outcomes-based regulation. In doing so, it needs to be recognised that the market is not homogenous – there are different segments of the market that meet different customer needs.

“Giving firms the flexibility to implement the Consumer Duty in a way that best suits their customers will be the most effective way of achieving the intended outcomes.”

The platform added that recent examples of new regulations that have been based on prescriptive rules that have been applied to an entire market, without recognising the differences in customer needs and the propositions that are designed to meet those needs, show how overly prescriptive rules can work against achieving the good customer outcomes the initiatives are trying to deliver.

For example, the FCA’s non-workplace pension consultation is proposing that pension firms have to offer a single default fund to customers, potentially including an element of de-risking. However, AJ Bell believes that its customers would be better served by a small range of funds with different risk levels.

The non-workplace pension consultation follows closely on from the requirement for providers to offer Investment Pathways to pension drawdown customers.

AJ Bell said these rules did not recognise that there are “fundamental differences” between platform pensions / SIPPs and insured personal pensions and therefore Investment Pathways have “only been effective in part of the market”.

The platform also called on the FCA to scrap, rather than retain, the Treating Customers Fairly principle in its rulebook. It said by maintaining existing rules alongside the new Consumer Duty the regulator “risks causing confusing layering of regulation”.