‘Gaping risk and oversight hole must be plugged’
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The FSA has warned that IFAs are failing to review their risk management and oversight processes as they transition to new business models ahead of the RDR.
Speaking at the annual Platforum conference in London last week, FSA conduct and risk division supervisor Rory Percival said that risk management and oversight was the “gaping hole” in the debate currently surrounding firms’ RDR transition.
He said: “To a greater or lesser extent, intermediary firms are changing their business model, usually at least in part in response to the RDR. Where business models change, firms are in a new place and they have new or different risks. It is of particular concern that among the 12 firms that wereviewed, not one had adequately reviewed their management and oversight in light of the changes they had made.
In most cases, they had not considered this issue at all and this is not acceptable.”
Percival said that while there has been extensive discussion about the business and investment implications of using platforms and the transition to the RDR, risk management has been largely ignored.
But he added: “The gaping hole is discussion and engagement of risk management and oversight changes that need to go alongside these general business changes.
“Our challenge to firms, compliance consultants, transition consultants, the media and conference organisers is to put this subject on the agenda and start discussing ways forward. Let’s resolve this now before it becomes too big a problem and we find other firms like Moneywise that we have to take through the painful enforcement process.”
The FSA fined Moneywise IFA £19,600 in September for platform advice compliance failings. It was referred to the FSA’s enforcement and financial crime division as a result of the regulator’s thematic review
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