28th March 2012
It's largely condemned as dead in the water. And with few advisers or product firms showing any interest in the mid-way model, the FSA could emerge in the same light as army commanders who are doomed to fight the previous war. The final document is unlikely to be more than a tweaking of the consultation document last September .
Enter the Network Directed Investor – to zero FSA fanfare
Thanks to its rearview mirror look at financial services, the FSA has nothing to say about the "network directed investor" – the growing band of savers and stock market vehicle buyers who find their own third way via the collective wisdom of online networks.
The FSA has not defined "simplified advice" but it is intended to be a streamlined process aimed at those with straightforward needs or for those with a more complex requirement which does not impact on their financial whole – for instance, someone with surplus cash wondering whether to invest in UK bonds or US bonds.
It was created to meet criticism that the RDR project, due to become reality in January 2013, would leave many without access to advice once the commission charging model was outlawed. Simplified advice, according to the FSA's 27 page guidance, will be regulated.
But with low take-up so far – and no signs of belated enthusiasm – the idea looks as though it could be still-born. One major product provider launched and then abandoned a pilot to give online "simplified" advice while just one or two national IFAs have put their heads above the simplified parapet.
Paul Yates, strategy and product development director at technology provider Avelo, told IFA Online that simplified advice was already "dead".
He said: "There were too many checks and it wasn't really simplified enough. The FSA has lost the impetus and everyone is going to do non-advised."
David Ingram, founder of provider financial services consultancy Aim Two Three, told IFA Online of the key concern around simplified advice.
"While the FSA and Financial Ombudsman sit back and say simplified carries the same regulatory requirements as full advice, why would anyone want to provide it?" he asked. "They're asking advisers to take too much risk."
So if simplified advice has failed to gain traction with just nine months to go before RDR, then the network-directed investor model should come to the fore. This is someone who accesses a wide variety of views on the blogosphere, from individual postings on sites, from investment websites and product providers and from execution only websites. It's a low cost or free way of absorbing a collective wisdom – and then deciding what to do with it.
Web as social support system
"The Network-Directed investor sees the web as their social support system, avoiding the mainstream media with their marketing messages and choosing to gain fragments of information from the blogosphere and online discussion" says Stewart Conway, publisher of Mindful Money.
Using the web as a support system means network-directed investors have access to much of the same material as IFAs so they can make their own decisions without the intermediation of paid-for advisers, whatever level of advice they offer.
But they can do more. By accessing blogs and other informational material, they can go beyond the sources that most IFAs use. More importantly, they can concentrate on what works for them, what they are comfortable with, and ignore what does not work for them.
Self directed investors storm US
The network-directed investor is a step-change up from the self directed investor movement which has grown rapidly in the United States where the growth of the self directed investor has been flagged as offering opportunities to firms that are able to grasp the movement, but little for those who ignore it.
Joe Stensland, managing director of wealth management solutions, at US financial services technology solutions firm Scivantage says: