IFAs face crackdown on platform choice
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Tough action will be taken against advisers who fail to assess the suitability of platforms for their clients after an FSA review uncovered poor practice.
It looked at whether firms that advise customers to invest through platforms give suitable advice and have systems and controls to support that advice.
In its discussion paper last week, Platforms: Delivering the RDR, the FSA says: “We found evidence of poor practice in all the key risk areas assessed. And while results varied, the high incidence of failings at certain firms underlined the need for vigilance, particularly as use of platforms is set to increase still further.”
It says the main reason for unsuitable advice was inadequately considering the overall platform solution, including the combined cost of funds, products, platform and advice.
The review found evidence of weak systems and controls at many firms in the sample, highlighting the need for adviser firms to review and implement strong oversight and management functions when introducing platforms into their business model.
The FSA says: “In light of the risks to customers and unacceptable practices identified, platforms advice will form a supervisory priority in the future. Where we find unsuitable advice and weak systems and controls we will take tough regulatory action.”
Threesixty partner Phil Young says: “I think it is a good thing the FSA is cracking down but it would be helpful if the regulator was more forthcoming with specifics on exactly what is required. There is currently a lack of a benchmark standard for what good practice looks like when selecting platforms which makes it easier than it could be for IFAs to get it wrong as they are operating in a void.”
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