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FCA admits failings over RMAR and issues new guidance

The FCA has issued additional guidance to advisers on the retail mediation activities return after admitting it has failed to give firms sufficient support.

Since 30 June, advisers have had to complete new sections K and L when completing RMAR returns, which requires firms to send the FCA additional information on initial and ongoing advice charges, whether advice is independent or restricted, and how advice is paid for.

Money Marketing revealed in September adviser trade bodies were pushing for an urgent review of the RMAR after firms raised repeated concerns over the amount of work involved.

Today the FCA has issued a technical note on section K of the RMAR which aims to provide further clarity on a number of issues, such as whether charges for initial and ongoing advice should be reported separately, and how trail commission which is offset against an adviser charge should be reported. 

Speaking to Money Marketing, FCA head of savings, investments and distribution David Geale says: “With the benefit of hindsight, the RMAR has not been as easy for firms as we anticipated.

“We were getting a lot of questions from firms struggling to understand exactly what we wanted them to do.

“Firms struggled a little bit with some of the language we used. We recognise we hadn’t given enough support on this, and we have acted quickly to correct it.”

The FCA is also looking at allowing firms who report to HMRC on a cash basis rather than an accruals basis to report to the FCA on a cash basis. 

Geale says the regulator is looking at this “closely” and hopes to be able to say more after Christmas. While he could not say how many firms it would affect, he says the change would generally affect smaller firms. 

Geale says the regulator has listened to advisers on the RMAR and has approached the issue differently to how its predecessor, the FSA, would have done.

He says: “One of the things we’ve done differently to the FSA is we have spoken to the industry about this. We have spoken to a number of trade bodies about the guidance and they have welcomed it.”

He adds: “We need data to do our job. It provides the foundations for supervision and helps us stop bad practice and prevent consumer detriment.

”There are strong reasons why we need data, but against that we are conscious that we ask firms to report a lot of data and that can be a burden for them.”

The FCA plans to formally consult next year on incorporating the contents of the new guidance into its handbook. 

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. We should all bear in mind the next time FCA asks for something that they now regard 11 months to sort it as doing it quickly…

  2. What’s the betting they have looked at all the data that has come in from all us firms, and just held their heads in their hands, thinking, now how do we make sense of all this ?

    They all ran straight the suggestion boxes nailed to the wall and filled them up with little pink slips saying “ditch these K& L sections now !!”

    FCA listen to us ppffftt !!!
    What a wonderful world it would be if they did ?

  3. CommentThe cynic in me says that you make a few tweeks and the FCA hopes that is the end of the matter. I hope that is not the case. Section K is still fundamentally wrong, a one size fits all approach using the assumption that a certain range of products and advice are related. The trust is that hourly rates are no indicator of consumer costs so focussing on these is misleading.
    Strategically the data provided is inconsistent, inaccurate and not checked by the FCA. Firms guess the figures and in some cases that is what the FCA advise as they did me . So why produce meaningless figures in the first place?
    But the practical difficulties of producing the return are just not understood. Small IFAs have no say in how back office providers develop their systems which are cater for the big networks. For example, each year we have well over 20,000 lines of commission which come over in inconsistent and inaccurate form. To manually correct these to reflect whether it is trail, renew, adviser charge, offset is impossible. Then there are the additional complications not readily recognised of breaking down income further, not for RMAR but for FSCS purposes!
    And in the meantime, under the threat of sanctions for failing to have inadequate systems and controls firms have filed returns any old how and spent a great deal of time developing internal systems that will require further changes if the FCA allow reporting on a cash basis!
    What we do is so very simple. Incredibly so. Why make it difficult?

  4. @Sam
    When we did our RMAR I asked FCA how I was supposed to reconcile financial accounts – effectively prepared on a cash basis with adviser charge (AC) on accruals iwthin RMAR never mind anywhere else; particularly as for us AC is nearly all paid through products so effectively the same as commission. Commission is of course reported on a cash basis in RMAR. So there is a fundamental mismatch in their reporting requirements which, I suppose, is what happens when you get lawyers to do accounts!

    I wrote to FCA saying it should all be done on cash as most small firms (and even with 8 advisers I count us as a smaller firm) account on a cash basis. They actually only offered accruals as they thought it would be helpful to firms (the banks probably account on accruals.)

    It actually says above they are considering giving the option (rather than now mandating) cash and that seems fair to me – although it would have been helpful if their predecessors had been better informed/ had ever listened to anyone. I actually take it as a huge positive that the FCA do seem to be listening. I don’t think I ever heard the FSA admit they may have got it even slightly wrong.

  5. @Simon and Sam – How many of us warned the FSA that this was going to be a mess? And David Geale says: “With the benefit of hindsight, the RMAR has not been as easy for firms as we anticipated.” Two ears one mouth you plonker David.
    As the the RMAR&Gabriel – Filled in most of it a few days after mine went live and then had to wait for our own figures to filter through and to check and correct. Spent two hours of MY weekend before the deadline farting about with it and then had to phone them on the day of submission and still couldn’t get it right without a lot of work. In the end i asked if I could submit all bar section K on time and section K when I could get it right.
    The chap on the fine said yes of course you can…. I said so you will not fine me then and he explained there would be an automatic fine. I managed to avoid swearing and explained he’d have good luck with that as they’d have to put me in front of their RDC or whatever it is called as I will NEVER pay a fine for THEIR incompetence and if they rry and remove my right to trade as a result of refusing to pay a FINE which has not been sanctioned by a court of law, then they will have a serious fight on their hands.
    For the record, I have never (that I can remember) paid ANY fine other than for failure to return a library book on time. No speeding, no parking “nada” and I don’t intend paying one for this bunch of clowns previously headed by someone fined and banned for drunk driving (John Tiner predecessor of Sir Hector the Undeserved) Even my disciplinary in the army resulted in a slapped wrist, but a fine for the Staff Sargeant involved (my boss) as he was out of order (drunk) and I sorted the problem out an then made an issue of it instead of brushing it under the carpet as was hoped by others who didn’t want it to happen (compared to others who’d had the same problem with him when drunk before)

  6. My very great friend in Rome 26th November 2013 at 6:57 pm

    I spent this afternoon completing three application forms to join a new network. The worst of the three, by a mile, was the FCA one, so bad that I had to send it off largely incomplete, with apologies, and a request that said network phones me tomorrow to establish the correct data that must be entered. That, I think, tells us how much further the FCA still has to go in terms of making things easier for intermediaries to comply with.

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