In its 'Dear CEO' letter, issued to all advice firms with investment permissions on 21 January 2020, the FCA set out five key areas where it felt attention was needed. Whilst the letter may have been unexpected, its contents were not and, indeed, were entirely aligned with the strategy we have taken over the past few years.
We have been working intensively on enhancing our services to address these very issues:
1. Assessing suitability of advice and disclosure
Assessing Suitability Review 2 will focus on initial and ongoing advice to consumers around taking an income in retirement, and to support firms we have:
- Provided consultancy services to help firms design, document and implement their advice process, including Centralised Investment and Retirement Propositions
- Developed Centra, market-leading advice technology that provides a single system to deliver consistent advice, including risk, asset allocation, investment and product research and suitability report generation
- Continued to provide ongoing advice around disclosure requirements and MIFID 2
2. Defined benefit transfer advice
The FCA has stated it will continue to focus until, in its opinion, the quality of advice in this area reaches the same standard as that of the rest of advice market, which will include supervision work assessing firms' advice process.
To support firms we have:
- Developed a DB Transfer Bureau Service to provide access to specialist firms to act as part of your supply chain.
- Provided initial due diligence, working closely with bureau partners to discuss key issues and best practice, and continually reviewing systems and controls within each of these businesses.
- Assisted those firms actively involved in the DB transfer market with their response to the FCA review.
3. Pension and investment scams
The FCA has identified key areas of risk and expects advisers to play an important role in preventing scams. To support firms with this, we have:
- Provided clear guidance on the need to undertake appropriate due diligence on introducers, a key focus of our core compliance visits.
- Provided CPD education, and enhanced due diligence, on non-mainstream products.
- Developed further support processes for the oversight of staff members.
4. Adequate financial resource and Professional Indemnity Insurance
The FCA is concerned that firms don't hold adequate financial resource or PI cover for the business activities they carry out. In this area, we have:
- Worked closely with main market participants of the PI market, including brokers and underwriters, to understand the challenges they face.
- Ensured specialist staff are available to discuss potential solutions for each firm's individual needs for PI and financial adequacy.
- Helped over 1750 directly regulated firms source their PI.
5. Ban on promotion of speculative mini-bonds to retail consumers
The FCA focusses not only on the restriction on mini-bonds but also reinforces the principles applying to all financial promotions and, as such, we have created specialist Centres of Excellence to help firms with all standard and complex financial promotions.
6. Senior Managers and Certification Regime
SM&CR came into force on 9 December and the FCA will be assessing compliance with the rules as part of their ongoing supervisory work. In preparation for the Regime, and for clarity around what firms need to do post-implementation, we have:
- Delivered a comprehensive programme of guides, training events, virtual training and site visits to ensure firms understand and implement the required changes for SM&CR.
- Provided further support, including workshops, which will continue throughout 2020.
Nothing contained within the FCA's letter was unexpected, and we have already developed services to help our Members with every aspect of the current regulatory challenges. Our commitment is to continue to be ahead of these challenges, and to develop and deliver the services required.
If this sounds like support you'd like for your business, then please get in touch.