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Behind the scenes of the FCA’s suitability review

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Analysing 1,066 client files is a pretty hefty chunk of work for the FCA to take on. Yet that is exactly what the regulator starting doing last April, when it wrote to nearly 700 advice firms saying it wanted to assess the suitability of the sector’s recommendations.

Individual results are in and, for the most part, it appears advisers have dodged an enforcement bullet and no one is going to have the regulator knocking for a more serious talk – at least not about the specific client files in the review.

Another positive is the FCA taking into account the structure of the market in the review; 500 of the firms assessed were classed as a small firm, but a larger number of files were still collected from larger advice firms to reflect their systemic importance.

Chinks in the armour?

It has not all gone smoothly though. Money Marketing understands all the data the FCA needed for the review was in the regulator’s possession well ahead of October last year, meaning it took at least six months for the FCA to send out its personalised feedback.

There was confusion as to whether any wider results would be released on top of personalised feedback, or whether the regulator would just use its findings for internal purposes.

The FCA has now confirmed it intends to publish generalised results in some form later this year. However, it has still not committed to what form this will take: good and bad practice statement? Guidance document? Further thematic review?

Two former FCA staffers we have spoken to in recent weeks are still none the wiser.

How the FCA decided upon which firms it wanted to approach and what files it wanted is still not 100 per cent clear either.

Money Marketing has heard of one case where the FCA originally requested a very basic client file. When this was questioned, the FCA was adamant in its file selection, only to request a more appropriate file days before the review deadline.

At the other end of the spectrum, another adviser was asked for the “worst possible file”; an overseas clients who wanted to cash in their pension to bring his family to the UK.

It is understood that though the FCA did split responses into pension accumulation, decumulation, and non-pension investment business, there was no specific business line targeted (the regulator had already visited a number of advice firms to assess the suitability of their defined benefit transfer advice in the wake of pension freedoms).

Where the burden lies

Firms are already making changes as a result of the feedback. One national IFA Money Marketing has heard from says while their advice was rated as suitable, they will now make it clearer exactly what services are received for the ongoing advice fee as a result of the FCA’s input.

In reality, however, it appears most advisers will not have had too much contact with the review, though many used a hotline service the FCA set up to answer queries.

Money Marketing understands a lot of the FCA communication was conducted at a network compliance level, so firms who are not directly authorised might be none the wiser about what the regulator wanted to look at.

As advisers have been asked not to share their results with the press, Money Marketing and the adviser community may have to wait to see the full extent of the review.

Justin Cash is news editor at Money Marketing – follow him on Twitter here.



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