The FCA has laid the groundwork for a review of with-profits policies.
The regulator has issued an information request to “the majority” of firms that run with-profits funds – offered by life companies to pool investors’ money to invest in a range of assets – to help it conduct an inquiry into the sector.
The work forms part of one of the FCA’s priorities: ensuring the fair treatment of existing customers.
The FCA singled out ‘smoothing’, where policies attempt to minimise short-term volatility, and guarantees as particular features of with-profits business, but will decide on where it wants to focus after the information request has been answered.
The full review will start in the final quarter of 2017 or early 2018.
The regulator writes: “We do not have pre-determined views about whether any particular practices are unfair or are leading to unfair outcomes and have not drawn any conclusions about whether with-profits customers are being unfairly treated.”
Former regulator the Financial Services Authority reviewed with-profits business seven years ago.