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FCA policy head on the future of advice regulation

FCA policy director David Geale speaking at the PFS Festival of Financial Planning

The FCA’s director of policy has shed light on the regulator’s approach to the advice market, backing a number of measures intended to improve access to advice.

In a presentation at the Personal Finance Society Festival of Financial Planning today, David Geale told advisers that, on the back of the Financial Advice Market Review, the regulator was keen to see more innovation to make sure more consumers sought advice.

He said: “A healthy market should provide a range of accessible advice and guidance services for all.

“We know consumers don’t take enough interest in their long term financial planning. They are disengaged.

“I don’t think anyone can shout victory just yet, but I do think there have been positive steps in the right direction.”

He noted that “advisers need more clarity on the boundary between advice and general guidance,” and hoped that the FCA’s new definition of advice, due to come into force in January, would give more companies confidence to set up services to provide guidance services for customers with simple needs without fearing they would stray into regulated advice.

Geale also reflected on the regulator’s recent review of the Financial Services Compensation Scheme, noting that having some form of lifeboat fund “inspires confidence” in financial services among the public.

He said: “The unanimous view coming from right across the financial services sector is the compensation scheme is a huge benefit.”

However, the regulator is working on ways to make sure firms which are liable for failures pick up more of the bill, Geale said.

He could not rule out volatility in future levies for advisers though.

He said: “Will we be able to reach a position where we never have an additional levy? No, because events happen.”

Geale also shed light on why the FCA did not lean towards more prescriptive regulation of the professional indemnity insurance market during the review. For example, he said that the FCA abandoned the idea of preventing advisers from selling products they did not have PI cover for because, currently, insurers do not tend to individually risk rate small firms.

Instead, they often will withdraw cover or decide not to offer it on a blanket basis if the FCA begins reviewing a sector, meaning that low-risk firms would also be left without cover and therefore be unfairly prevented from advising on specific areas.

While acknowledging that the FCA “can’t have a supervisor outside every firm,” Geale said the regulator wanted to be more proactive about identifying possible future risk areas with more oversight work, for example, like the way it has looked into the defined benefit transfer market recently.



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

  1. “the FCA abandoned the idea of preventing advisers from selling products they did not have PI cover”??? If that’s the case, any small firms flogging UCIS and such like are themselves highly unlikely to have sufficient resources to meet any orders for compensation as a result of mis-sales. Consequently, they’ll swiftly default and, if they’re Ltd Co’s, dump their liabilities on the rest of us by way of the FSCS.

    Given this scenario, it would be interesting to know just what proposals the FCA is investigating to ensure that firms which are liable for failures “pick up more of the bill”. Once they’ve folded, they’ll be out of the game (until the FCA reauthorises them under a slightly different trading name) and won’t be around to pay anything at all into the FSCS.

    Or am I reading this wrong? Is the FCA planning a risk-based scale of FSCS levies? If so, firms selling toxic junk without relevant PII will find their levies so vast that those alone will force them to stop.

    It seems to be a decidedly clunky way of doing it. Why not just forbid firms from selling anything for which they don’t have relevant PII cover and, if they are selling anything off-piste, require them to prove that they have proper cover?

    That aside, it’s all academic now that so much damage has already been done as a result of catastrophically negligent regulatory supervision. The rest of us will probably be paying for all these uninsured liabilities for a decade to come.

  2. Trevor Harrington 8th November 2017 at 3:00 pm

    Eh ?

    Was he talking about the same regulator as the one we use ?

    …. I was going to paraphrase a long list from the above report where it would almost seem that he has been living in some sort of parallel universe … or perhaps a different planet entirely.

    His complete inability to understand where regulation is at, how it got there as a direct result of the regulators own actions over the years is … well … it is stunning …

    How very … very … very disappointing.

  3. He said: “The unanimous view coming from right across the financial services sector is the compensation scheme is a huge benefit.”

    Blast, I must have missed my chance to vote. Unanimous, wow.

    • Financial advisers only make up c.2% of the population working in the financial services sector (although the majority of claims come from our clients).

      FSCS is seen widely as a huge contributor to people engaging with financial services – it protects their savings, their deposits, their pensions, their money transfers etc.

      Without it there would be a lot more money under mattresses – and that’s bad for everyone.

  4. The future is looking …………Uuummm ! pretty much like it does today ?

    Not very inspiring is it ?

    Doing what you have always done David will not change the end result.

  5. Julian

    My thoughts entirely.

    Why have PII cover when you can just sell junk and go bankrupt when things go wrong.

    The most stupid idea for a long time

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