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Advisers to record telephone calls under FCA Mifid rules

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The FCA is planning to extend the requirement to record telephone calls under Mifid II to advisers.

In a consultation paper released today, the regulator proposes extending the recording requirement to all “Article 3” firms, which includes financial advice firms and corporate finance boutiques.

It says Financial Ombudsman Service information has shown the majority of complaints about investments centre on the conversations when investments are sold.

The consultation paper says: “We think taping conversations between firms and their clients is likely to be an effective way of advancing our consumer protection objective.”

Under Mifid II firms are required to record telephone conversations and electronic communications that relate to “the reception, transmission and execution of orders, or dealing on own account.”

These recordings must be held for at least five years. 

The regulator says it is will consider alternative approaches for smaller advice firms to help lower costs.

Last year, the FCA confirmed that advisers will not have to record face-to-face meetings under the Mifid rules.

The consultation paper also includes proposals to extend Mifid II’s inducement ban for firms giving investment advice to retail clients.

The proposals are:
– to extend the ban to restricted advice, as well as independent advice
– to ban the rebating of inducements to retail clients, and
– to amend the adviser charging rules to apply the inducements ban to the “business of providing advice” rather than only to inducements provided in giving a personal recommendation.

The regulator had previously held off on publishing the results of a review into inducement deals between providers and advisers because of upcoming changes to the rules under Mifid II.

FCA chief executive Andrew Bailey says: “The changes to the rules we are proposing today reflect key themes that we have worked on in both retail and wholesale markets over recent years to promote competition and market integrity.”

Bailey adds: “As we said in our statement following the EU referendum result, firms must continue to abide by their obligations under UK law including those derived from EU law. They must continue with implementation plans for legislation that is still to come into effect, of which Mifid II is one such example.”

The FCA says how it is adopting Mifid II is consistent with the Financial Advice Market Review’s recommendation that the regulator should help firms to deliver streamlined advice.

Mifid II comes into effect on 3 January 2018.

The consultation closes on 4 January 2017 with a further consultation expected to be published before the end of this year.

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Comments

There are 27 comments at the moment, we would lover to hear your opinion too.

  1. So much for the FAMR – a sledgehammer to crack a nut.

  2. Does this seem a bit pointless if there is no requirement to record meetings? I wonder whether clients will be quite so open about some sensitive issues in their lives if they know that the meeting is recorded and that the recording will inevitably end up on some cloud based back up server. However, I can also see that such recordings would be a brilliant way for honest advisers to protect themselves against false claims. I’m torn on whether this is a good idea.

  3. So that means I cannot use my mobile and have to travel to an office with recording facilities in order to speak to a client? How ridiculous. More costs for the adviser, another layer of costs from the Regulator, the end consumer has to pay more when FAMR seeks to widen the availability of advice at a fair price.
    it is a fair bet that those selling dodgy investments will not comply, and the bill will continue to be paid by honest advisers.

    • Geoff Sharpe: I cannot speak for Apple but there are a number of very effective call recording apps available for Android phones. You can set them to automatically record every call or exclude some callers by default.

      • Howard
        The problem with these recording solutions is that they are still apps, and an incoming call directly to your mobile number will bypass the app dialer and use the generic device dialler, thereby bypassing being recorded. Using a SiM based solution, even on Android devices, means there’s no change required in the users behaviour required, just continue to make and receive calls and sms messages as your always have. We are all tired of learning to use yet another “app”
        On an iOS device, using the latest version of iOS the same applies, but with any older version of iOS it’s simply not possible to record a call directly on the device, you have to use some style of callback application for outbound calls, which is horribly complex and introduces long dialling delays and possible quality issues with VoIP latency, delays etc. When using these all native inbound mobile calls are still not recorded, meaning it’s fairly pointless if your client rings you on your mobile number.

    • Geoff
      We have the simplest solution that doesn’t require any complex apps or advanced technology and just uses the SiM in your mobile phone to record all calls, both incoming and outgoing, and sms messages. You can also keep your existing mobile number. It’s cheap and available now, we have lots of IFA’s already using the service, to protect themselves from unscrupulous clients, who claim they weren’t advised correctly. Regards Phil

  4. Totally ridiculous for smaller advice firms. How are you supposed to record a conversation with a client which is held on a car phone (hands free of course!) Most transactions are carried out using forms and most arrrangements implemented by IFAs are packaged. This is totally disproportionate. Nevermind Brexit and the fact that we may or may not be subject to Mifid come 2019!

    • Further to my reply to Geoff Sharpe, Android call recording apps can work automatically on bluetooth connections such as within your car (as you say, on hands-free). I should say I have no commercial interest in any of these apps!

  5. 5 years will not satisfy FOS and so we will need to keep recordings longer. Where is the evidence that small firms are having disputes with clients as a result of telephone call conversations? What about mobile calls? It is disproportionate and excessive, an additional cost to cover a scenario which has never been a problem in all the years I have worked with advisers.
    If it is a problem, then certain forms should be required to record calls but for goodness sake, not all.
    Personally, I voted for Brexit because of the mindless regulation that comes from the FCA which is disproportionate and unbalanced and follows misguided EU practices. If coming out of Europe is supposed to reduce costs, this is not the way to do it. Just to whom is the FCA accountable?

  6. My new approach is to look at things like this and think… ‘so what would a dodgy person who isn’t acting in the best interest of the client do’.

    Here they wouldn’t record the call – or perhaps visit in person – seemingly then circumnavigating the requirements?

    So we end up with a swathe of recordings of TCF phone calls by ‘the good guys’, the bad stuff continues unabated, and the ‘good guys’ have the cost and hassle of proving they are doing what’s already in the client best interest and passing the cost to the client. Sigh.

    Those who aren’t regulated – they just carry on as they are.

    With regard to ‘inducements’ – if that refers to commission then it needs to be extended to ALL financial investment/pension products sold to a UK consumer – advised, non-advised, independent, tied, multi-tied, restricted, whole of market restricted, my mate down the pub says so, whatever.

    For as long as something falls outside of regulation that is in place to protect consumers, that will be the best thing for the client they are trying to sell something to.

    For as long as consumers remain unaware of the range of advice that exists (from IFA to ‘non advised sales’ and everything in between) and that there are unregulated products out there nothing will change. No amount of media coverage will solve it – just look at the amount of ‘cold call’ scams that happen day to day – simple and clear regulation needs to be used to protect consumers.

  7. Layer upon layer of sticking plasters over rules, not fit for purpose !

    Tell me, what use is 5 years when we have unlimited liability ?, what about mobile phones ? what about face to face meetings ? what about another increase in costs to our clients ?

    Good grief, talk about being nailed hands and feet, to the regulatory cross …… forgive them father for they no not what they do !

  8. Lots of apps available for Apple and Android for easy recording of calls on mobile phones. The technology side of this isn’t really an issue, as it is relatively cheap and simple to implement. I suspect most will get stuck on the principle of having to record and store every client call.

  9. Well, again we are left disappointed with those that seem to be shaping the future. Thankfully this is just a consultation paper right? so presumably someone will look at comments like these? (ironic wink).

    As others have said, technology is far ahead of the regulator… what about Skype, gotomeeting etc? fraudsters will always find a way around half-baked ideas like this. The entire point of a reason why letter is so that the client is protected and the adviser presumably too. This ought to be ample protection (if they are being done properly).

    The suggestion is utterly pointless and should only be implemented for those that sell over the phone without sending anything electronically or in the post.

    Mind you, if it does come in, I’m told BT are going to be turning off the current system and moving to VOIP within the next 5 years, so perhaps the pain will not be as significant as some fear…. assuming you live and work somewhere with reliable internet connection (ha ha!)

    On the flip side, the client that promises that the fee cheque is in the post, will now be quicker to pay….

  10. We started recording phone calls about 8 years ago, following a couple of insurance companies disputing they’d told us certain things on the phone. Since then, it’s been very useful both with providers and a couple of clients to “remind” them what they actually said, rather than what they claim they said. The clients have in fact been reassured by the evidence, to show we were correct in what we’d said to start with.

    Not expensive, and as stated above, you can easily include mobiles as well. Definitely gives you peace of mind.

  11. Is this so that the Regulator or some other bureaucrat can listen in? Presumably client confidentiality doesn’t count. Recorded calls can be made just to satisfy the regulator and confidential calls made on another number.

    Or is it for adviser protection in the case of a complaint. If this is the reason then it is up to the adviser to decide if he really needs this.

    Some advisers actually have clients call on their personal numbers at week-ends – how will this work? What happens when we leave the EU? Will MIFID be irrelevant?

    Yet again it appears that regulators both here and in Europe don’t really understand how UK advisers work.

  12. Victim of dodgy claims 29th September 2016 at 12:38 pm

    I have recorded calls for years. IFAS need to protect themselves and this is a must when you consider the FOS default position for advisers is guilty regardless of how genuine a claim is. It would be foolish not to invest in ones own business when advisers have no real protection.

  13. No problem, I will learn sign language and teach my clients so that their costs remain static. I will also demand that the Federation of Master Builders commands its members to record all conversations whether it is about fixing a wall, building a wall or building an extension.

  14. After reading Dominc’s comments (I agree BTW)

    I have starting wondering if this is, aimed at Full advice (indy or restricted)

    This in turn would not apply to, tied, robo-advice and or non-advice ?
    If so….
    There seems to be a common denominator in all this (and based on recent articles)…….. tie the financial advice market up in very secure knots, while banks, robots, non-advice and quite frankly your mate in the pub, free licence to do what they like ?

  15. It is either record EVERYTHING or nothing, it really is that simple, or is it? The argument that the FOS puts forward clearly cannot be fully covered, unless everything is record. If not all that will happen is the client will say it was said in the meeting or the call was not recorded.

    I have a suggestion that could work, but we all know the regulators record on listening to actual practitioners. So the client can talk openly (which is very important), the whole of telephone call or meeting should not be record. However, at some point it should be advised that it will be taped, recorded. At this point a brief outline of the information received, requested action should be given. If advice is being given, all warnings, dangers explained, areas covered and clients agreement that they understood fully. I would suggest this should be videoed if a meeting.

    Try saying in 10 years time you did not understand, they did not explain, when there is a recording, fully highlighting the dangers and you saying yes I fully understand these points. Try saying you did not instruct something, when your recorded.

    Its not such a silly idea, it just needs a little thought. It also needs careful marketing to all parties. Lets face it, it would protects both parties!

    If you say to the client this is being recorded to protect you not me. It will insure that advisers will have to cover all dangers correctly to gain the protection!

  16. Agree with Martin and Victim, why on earth would you NOT want to protect yourself and your business in this way? The technology is inexpensive and it’s an additional layer of protection that has saved us many times over the years.

  17. The FCA is a failed entity trying to justify its existence by makework schemes such as this. Meanwhile it is utterly incapable of getting to grips with the real criminals who have infiltrated the adviser sector and who are scamming clients by selling them vastly overpriced AIM shares into SIPPs. Work like that goes into the ‘too hard’ box. Shameful and pathetic.

  18. Mistrust, mistrust, mistrust, its definitely the wrong way to go. Its the wrong way for SOCIETY to go. Recording nightmare hacking issues will happen, more fines blah, blah blah. Just take the easy option every time why don’t you, rather than managing it properly and not having to get to this decision now. We need proper legislation, proper protection for both customers and advisers written in a common sense way, otherwise there is no end to this. What next retina scanning on your phone at home just to prove it is you on the call. We’ve lost the plot

  19. As a newcomer to the sector, I am really surprised more people don’t record their calls.

    All I see in comments is how the FCA & FOS is out to get advisers, so why on earth would you not want concrete proof of your advice easily accessible?

    There are plenty of business that offer call recording facilities, for mobiles as well, so the “we’re a small business” doesn’t seem valid to me.

  20. We are a small one adviser practice and have used telephone voice recording for many years. We have recently installed video and voice recording for all of our meetings with clients and anyone else. Although the intial cost was quite substantial, I would now sell my children before I got rid of this. It provides so much reassurance of what was said and more importantly when it was said that I think every advisory company should adopt it. We have never had one person have any issue when we tell them their telephone call or meeting is being recorded, apart from the insurers that get a bit uptight when we inform them that we are recording them.
    We are using recorded evidence in court for for the first time in December(it has nothing to do with our FP practice), I want to see his face when we prove conclusively that what he is denying, he actually said. We are expecting him to settle out of court once he sees the transcripts.

  21. I have long thought getting the FF signed by both parties would be a good idea for the same reason.

    That way, the facts forming the basis of the advice is beyond dispute.

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