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FCA in mass file check to review advice suitability

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The FCA is writing to around 700 advice firms ahead of a supervision exercise focusing on the suitability of advice.

The regulator will collect over 1,000 client files in total as part of the exercise, with file requests mainly targeted at 500 smaller firms. Larger firms will have to provide a greater number of files, which should reflect the business’s market share.

File reviews are expected to centre around assessing suitability, including copies of suitability reports and the way firms document their investment and research processes.

In the FCA’s 2016/17 business plan, published earlier this month, the regulator identified suitability as one of its key risk areas for the coming year.

It said: “Advisers may not always give consumers the most suitable investment advice, may offer a limited range of products or have staff reward schemes that motivate sales over suitability.”

The business plan added: “Our supervisory focus will continue to be on supporting increased professionalism in the financial advice sector.

“We will increase our communications with the sector and continue to assess how suitable advice is, monitoring any changes that result from implementing proposals from the Financial Advice Market Review.”

The FCA published a six-page report in February into adviser due diligence, after almost two years of work via a thematic review.

Following the review, one firm has been ordered to carry out a past business review and three more have been told to improve their processes.


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There are 16 comments at the moment, we would love to hear your opinion too.

  1. I sincerely hope that when conducting these reviews the assesor takes into account the regulatory guidance at the point of advice.
    Unfortunately the regulator tends to deliver specific retribution with no reference to its own historic guidance.
    I hope advisers are not unfairly sanctioned for advice and documentation that were correct according to regulatory guidance at the time of issue.
    I’m not holding my breath.

  2. I feel a major misuse of S166’s will follow, I well remember an arrow visit that cost me thousands on file reviews and not one was deemed unsuitable…. Guilty till you prove your innocent !

    Does anyone know why they don’t do this as an ongoing practice, rather than making a huge political point and doing it on-mass… I suppose if you plan is to kick as many small IFA’s as possible in the pants you may as well make a song and dance about it !

  3. I have a fear that all this review will do is tell us what we have done wrong and not what we should do. The FAMR should have identified SL as a serious cost and limitation regarding affordability when giving advice to the public and it would have been helpful and constructive to have input on this. Interestingly, our Compliance Support firm have updated their SL templates “to reflect the feedback we have seen from the FCA and the FOS. Both organisations have been critical about the length of suitability reports and the FOS has specifically stated that it feels a suitability report should not be ‘war and peace’.”
    Humm….. I wish this “feedback” had been made public and some clarity given as to what can be removed from that which previously was considered essential. And I do wonder if simplifying SLs only removes clutter from one document and places it in another client facing document, information that still has to be given to the client so they cannot come back later and say I did not discuss this with my adviser.
    Now we have to look at the new reports, compare them with the old ones and determine what we can remove safely with a claims company looking over our shoulder.

  4. I think this could be a good thing if we get constructive outcomes. However a contributor on a different site earlier made a very good comment. Get the FCA to for their views and then forward these to the FOS to be assessed as if they were complaints and ask for their views Without knowing what the FCA thoughts on them were of course). The FCA could then compare the two sets of data to see just how closely the FCA rules and FOS judgements aligned or how far apart they actually are in reality. This comparison could make for interesting reading and either prove or disprove what many have thought for years.

  5. I recall seeing SL from tied advisers which were 6/8 pages.

    Also SL from a network which for transferring a single policy onto a platform were 30+ pages.

    Seriously, anything over 10 pages is going to be hard to discuss in a single advice meeting.

  6. In another article on this site yesterday, the FCA was being criticised by the NAO for having very little evidence that the £0.5bn a year that it spends persecuting the industry was having any effect on misselling.

    I would be interested to know who at the FCA has the knowledge and experience to assess these files. This looks like the actions of a regulator that has nothing to do and therefore is fishing for issues that are probably not there.

    Instead the FCA should be regularly checking the files of firms that receive significant complaints but leave those firms alone whose customers are satisfied. It’s called a regulatory dividend and it’s something we were promised years ago.

    …And meanwhile the rogues are still happily selling unregulated investments whilst the FCA sits by and watches the innocent firms struggle under their FSCS levies.

  7. Yet again we have an illustration of the ineffectiveness of the RDR. The Regulator itself has not ‘got with the programme’ and it seems that many advisers haven’t either.

    All this is still based on products. If it was based on pure advice it would be difficult for the Regulator to get to grips. What they evidently mean by advice suitability is what PRODUCTS were sold and are/were they deemed suitable.

    It seems that for all the agony and heartrending, neither party has moved much since RDR.

  8. Will they request SLs from SJP ?

  9. Since circa 70% of advice business typically includes replacement (or transfer or “roll over”) business, this is going to be interesting to see how much the good and bad practice lessons of FG 12/16 have been implemented across the industry. I suspect that some need to start sweating, particularly so called “consolidators”. Back in 2012 the regulator called a lot of what they found “unacceptable”. How much change has there been since RDR caused a lot of distraction in between?

  10. We don’t provide products anymore, we provide ADVICE, most of which is verbal and actually if you think about how the job has ALWAYS been clients want you to explain and tell them what do do, not READ a report, before or after a product is sold. Suitability reports have got longer and longer to give the FCA and compliance consultants a stick to beat us with, which the FOS throws away as they beat us with their shoes!

  11. It is sobering to remember that the last time the regulator reviewed files containing replacement business advice (2012), 70% failed, mainly due to cost comparison failures. Will there be improvement this time?

  12. It will certainly be more negative publicity which will yet again undermine confidence that the FCA wishes to restore unless it is handled constructively i.e. where improvements can be made rather than x% was unsuitable.

  13. About time the FCA did this. The hidden conflicts of interest, ‘sales’ bonuses and lack of ongoing advice by the ‘Independent’ advisor companies that will be caught, can only help to further ‘professionalise’ our ‘industry’ and deliver the correct outcomes for the investors.

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