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FCA targets drawdown in advice due diligence review

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The FCA is homing in on income drawdown products as it kicks off its thematic review into advisers’ due diligence.

The regulator has sent an information request to a number of advice firms ahead of site visits.

In its 2014/15 business plan, the FCA announced it would be carrying out a thematic review on “effective due diligence for retail investment advice”.

Money Marketing later revealed this would include the level of due diligence advisers carry out when choosing a platform.

The review was subsequently delayed but has now been resumed.

The information request, seen by Money Marketing, asks for details of advisers’ due diligence on: income drawdown products, collective investment schemes, platforms and discretionary investment managers.

The FCA asks firms to include details of any tools or third parties used, the criteria applied to select or exclude certain products and services, and any additional research undertaken on shortlisted providers, products or services.

Threesixty Services managing director Phil Young says: “There has been a lot of noise around the development of new income drawdown products. The FCA wants to ensure advisers fully understand how these products work and their risks.

“Advisers need to demonstrate they have carried out sufficiently broad research on the products available in the market, as well as checking that the product they have selected does what it says on the tin.”



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. To plagiarise a famous quote “Be afraid, be very afraid”

    Drawdown has been the default option riding on the back of Governmental and press enthusiasm. Remind you of anything?

    Drawdown has been eagerly adopted by the advice community as it does ensure a continuing income stream. Whether it is/was such a good idea for the client will remain to be seen.

    The results of this review will be illuminating – to say the least.

  2. The result is already known. There is not enough understanding and due diligence will be the outcome. The fact that this can be stated, as there are no actual agreed levels to measure or agreed, should be cause for concern! The regulator can say what they wish, we have no way to disagree.

    You may ask how I know this and that is a very good question. It’s very simple really, someone will have to carry the blame somewhere down the line for poor guidance and outcomes for the pension freedoms and we are being lined up to take that fall for everyone. What is sufficient or good due diligence? We have asked many times, especially after KeyData and Arch, yet we never actually get an answer. It will not matter that a consumer arranged their own drawdown after taking guidance as when the train wreck happens, the reporting will state advised.

    So when consumers run out of money, don’t have enough income the whole system is being primed to point the blame straight at the adviser community. Let’s wait and see if I am right, anyone like to state some odds on this being the likely outcome?

  3. if i was the fca i would start the review at the providers offices and see how their non advised drawdown works

  4. This tells us why the networks are so very hot on DrawDown recommendations.

  5. I’m wondering if this is a way that the FCA could reduce advisers costs. It is stupid for advisers to charge clients to do due diligence on companies using information that is in the public domain or provided by those companies (or the paid for actuaries and rating agencies). The ONLY due diligence we should need is that a firm is FCA or PRA authorised and regulated. The regulators have had access to the public information as well as regulatory returns. If they cannot spot a problem then it’s very unlikely that I will.

    I realise that this will mean that the regulator would need to take some responsibility for the product providers that they regulate and that they won’t be able to blame advisers when it all goes wrong but other than that it might be a good idea.

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