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FSA reveals extent of firms’ failings in platform review

The FSA has revealed that every firm it visited as part of its platform thematic review did not have the appropriate systems and controls in place.

Speaking at the launch of Aifa’s platform due diligence guide in London today in association with Standard Life, Rory Percival, from the FSA’s conduct risk division, said the issue of systems and controls was one of the biggest concerns to emerge from the regulator’s thematic review in March.

As part of the review the FSA carried out a desk-based analysis of 33 firms advising clients to invest through platforms, with 12 chosen for detailed assessments.

Percival said that out of the 12 firms visited, every firm had insufficient systems and controls in place to some extent.

He said: “Where a firm has decided to change its business model, firms clearly need to look at how their business is developing, what different risks and concerns could arise from that, and ensure that their oversight arrangements and control arrangements are up to date.

“This is a particularly concerning area because when we did our thematic review earlier this year of the firms that we visited, to a greater or lesser extent, this was a failing with every single firm.

“I don’t think it’s an area that’s necessarily been discussed or considered sufficiently within the industry to date.”

Percival confirmed that Moneywise IFA, which has been fined £19,600 for platform advice compliance failings, was referred to the FSA’s enforcement division following the thematic review.

Moneywise was the only firm to be referred to enforcement, although two other firms were also required to carry out a past business review.


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

  1. So how come these firms are still allowed to remain in business? How can the FSA be confident that investors are being appropriately sold platform based products

  2. So, 100% of firms failed and its all the firms fault.

    Imagine 100% of pupils failed their A levels in one school, it would be put down to teacher incompetance.

  3. I wonder what it is they actually want.

    Could an IFA be investigated/fined/beheaded for placing investments through, say Cofunds, whilst another IFA placing the same investments direct with the investment houses would be fine.

    Despite the fact that the end product and charge to the client is identical. The only difference is that Cofunds allows you to value, track and switch the investments quickly and efficiently.

    Possibly the FSA should be investigating IFA’s that are not using platforms rather than making life difficult for those that are.

    When will the FSA realise that no matter how hard they regulate they will only achieve perfection when the last adviser goes out of business. Time for some pragmatism I think.

  4. If “every firm” the FSA visited did not have the appropriate systems and controls in place,then this must be down to the lack of clarity from the FSA.
    Maybe if the FSA weren’t so bad at doing their job properly, then they could start looking at why are they so ineffectual in giving clear guidelines

  5. I don’t understand this. Platforms need to be seen in their correct context, which is as administration companies. They are not product providers, they are gateways to access many providers with minimum administration as well as cheap inter-provider switching costs.

    When seen in this light then surely if the cost of going via a platform is the same to the client as going to each fund manager directly then platforms should be seen an inherently better every time – particularly with additional features such as online information access for clients which would othewise not be possible without the IFA buying their own systems for this.

  6. Mr Smug is right.
    What are they looking for? All a platform is a portal to trade through.
    Which ever way you transact its about the advise , cost and service……….recording what the client needs, requires and elects to do.

  7. Could someone please forward this farce to the prime minister with a request to immediately disband the world’s most incompetent regime – The FSA !

  8. So “every firm” visited to lacked appropiate systems & controls. Looks like a ruse to generate more fines to plug their ever growing payrole costs and massive accounts deficit.
    Did the FSA staff conducting the review have any financial services qualifications. The one I spoke with had a degree in geography……Platforms now, what next???

  9. perhaps rather than continually put firms down, would it not be more helpful is the FSA actually helped the IFA and explained the rational behind the failure.

  10. What a farce. There more to this than meets the eye but are IFAs purely system controllers or are we supposed to be advising clients? What can be the difference in placing business direct with a provider when compared to a platform. It is all the same process except perhaps for Due Diligence. This is easy with so few and means greater administration efficiency, meaning less complaints about providers, easier paperwork for both client and business as well no bias towards funds, high paying commission products and lower costs and charges passed on to the client. Pot calling Kettle I say after the Keydata debacle, who incidentally are advisers not providers and who should have been fully checked out by the FSA when they appliced for their licence to advise. They really do appear to be from Planet Mars on this one when there appears to have been no complaints and no financial loss to clients. What a whopping fine for something that appears to have caused on ill affect.

  11. Julian.

    While platforms are IT platforms or admin companies they are nearly all regulated as “intermediaries”. If one goes pop it will be down to other “intermediaries” to pick up the bill…..sound familiar?

  12. Dont worry everyone!! it’s OK.

    The people at the FSA will have secured their new roles at major banks or another government department in another ivory tower.

    How about some serious cost cutting for the FSA? How about moving the head office from the ‘palace’ sorry Canary Tower, sorry Warf? why not move them to the North, say Rotherham? Doncaster? Scunthorpe? I am sure we could find buildings to rent at around 10% of the cost of Canary Warf. We could also staff it with equally as incompetant staff, or even staff that can read exactly what it says on the computer screen in the same way as they do at the moment. We could even find some people who can tick boxes in the same way!

    When are we going to get some clarity from this disasterous regulator??

    Tell us what you want us to do and I am sure that we will do it!! Dont just come up with ‘principles’ as we all know that the industry will interpret them in one way, the the ‘regulator’ will (with the benefit of hindsight) interpret them another way.

    Its about time the FSA put their heads on the block and gave proper guidance, not principles.

    even in the articles recently published they say how bad everything is as 100% of firms ‘failed’. that is what the headlines say. Not many end users / public will read that the number of firms visited was so tiny. The FSA dont even provide assistance by telling us exactly how the failures have come about!!! Give us a clue!!

  13. @ Julian
    The point is surely that its NOT the same cost as going to the fund mgrs directly, because you can nearly always access the actual assets themselves more cheaply than going to them directly. Knowing how to is surely part of the benefit to a client of using a professional adviser? To simply compare the cost of a recomendation with what the client could do direct, is like saying you wouldnt buy your holiday thru Travel agent B (even tho its the same holiday) for less than agent A, simply because agent A is matching the direct price. By “noticing” that the cost to the client through a supermarket is no more than going direct, you are already clearly taking cost into account, so shouldnt you finish the job and look at all costs thru different options for the client, as long as he pays you to do it of course!!!

  14. FSA F****** S***** A*******

    fill in the blanks

  15. Crazy gang IFA member 3rd September 2010 at 10:08 am

    If they set the bar at such an unreasonably high and unacheivable level they are always going to come up with the same result like this. This was a typical self fulfilling excercise on behalf of the FSA. I agree with other comments made; a platform is simply a means to hold and administer clients assets. If the advise for those assets held is flawed or inappropriate then so be it. No change there then. I think the FSA are making a mountain out of a molehill.

  16. The FSA does not understand the nature of financial advice. Time and time again they prove this point.

    If a Fund Platform/Wrap Provider is clearly falling short in terms of the quality of service or financial backing then it should be the FSA that knows this first. As we all know they are incapable of being pro-active – they are nearly always reactive – and even then it is too late!

    The FSA is vague on TCF deliberately because they don’t want to be liable. This same stance is the case in nearly all they do. Will they listen to the very people who know the advice sector better than anyone? No.

  17. The problem is with the FSA it is learning on its feet. It regulates with hindsight instead of being at the front of the pack leading and giving guidance.

    It is very easy to criticise someone having baked a cake and it is flat, but if they were given no guidance in the first place this is probably what will happen!

  18. Rory Percival is well able to argue his own corner, but as a former IFA and then compliance officer at another small FA firm he is more than well placed to understand what advice is about and what platforms are, so these accusations are well wide of the mark.
    This is repeating the findings in March – and it is to be hoped that things have moved on since then.
    If the costs were indeed all the same then there wouldn’t be the issue.
    The FSA has seen cases where clients are transferred lock stock and two smoking barrels onto wraps and platforms where there ARE costs over and above those incurred by using simpler arrangements, where clients are unnecessarily paying costs for product wrappers (SIPPS and bonds) which are unnecessary and irrelevant – and mostly because it suits the adviser’s business model to force their clients through this sausage factory. It’s exactly the same issue as moving clients who don’t need complex pensions into expensive fuly flexible SIPP options.
    Those of you who have blogged above clearly understand the issues and are not doing these things – but it’s happening, and it is right that the FSA (a) is concerned and (b) takes action (which must in these cases include giving firms the time and the opportunity to put things right, instead of calling in the firing squad the morning after the visit).

  19. Simple question to anyone at FSA:
    What do i have to do in order to meet your standards expected when using a Wrap platform to my clients benefit?
    If you can tell me this, then i will be able to know whether i am meeting your standards or not in an unambiguous manner.
    As things currently stand i have pretty much to ‘do my best on clients behalf’. Although i may do my best, you can visit me in several years time and say that i could have tried harder (with the benefit of hindsight) and therefore tell me that i have failed to act properly.
    Sadly, it seems, when dealing with individuals at the FSA they are decent normal type people. It just seems that the FSA itself does not have these same qualities.
    Is there any indication of how much clients have lost out because of this 100% failure rate of platform use by advisors? This would put the 100% failure into some perspective rather than worrying all Platform clients to death and inviting a host of complaint letters.

  20. Dear Gillian
    Your points are well made put I refer to my earlier comment…….its about the advice and its suitability…the main thrust is that if 100% are wrong then why are they wrong……..the FSA by implication are only intrested in advise……if not they would regulated the product providers!!!

  21. Wayne
    I think it would be along the lines of making sure that what you propose for the client is the most suitable solution for HIM personally, taking ALL relevant factors into account, and not just the most suitable solution for your firm. That doesnt mean it cant be the same solution as all your other similar (dare one say homogenous?!) clients, just that the reason why its the same needs to make sense for THAT client.
    Er, I think.

  22. Neil F Liversidge 4th September 2010 at 10:46 am

    As the FSA is committed to ‘openness’ and ‘a dialogue’ with it s customers (us) it seems to me sensible that we just ask them the question and put an end to the silly games. I am therefore writing to them as below and urge all to do likewise.

    FSA – Small Firms Contact Centre
    25 The North Colonnade
    Canary Wharf
    E14 5HS

    Dear Sirs

    Our Firm reference Number:

    We refer to the recent report in Money Marketing headlined ‘The FSA has revealed that every firm it visited as part of its platform thematic review did not have the appropriate systems and controls in place.’

    As you will appreciate we wish to run our firm in as compliant a fashion as possible. However we cannot seem to find any trace of any advice from you as to precisely what systems and controls you wish to see in place where a platform is in use.

    Obviously it is in nobody’s interest for this to be a guessing game. So if you can just please let us know precisely what systems and controls you wish to see then we will indeed ensure that they are in place.

    We look forward to hearing from you in due course and thank you in anticipation.

    Yours faithfully,

  23. I totally agree with Gillian Cardy’s comments.

  24. RETROSPECTIVE REGULATION!!!!!!!!!!!!!!!!!! 4th September 2010 at 4:59 pm

    OK FSA pray tell us what you want from us before you apply retrospective regulation yet again! Sure we know the buzz word is due diligence but I thought the FSA carried that out when these firms carried out their regulatory submissions – isn’t that what regulation is about? Personally I am sick and tired of trying to second guess these idiots in Canary Wharf. Put your regulatory rules in motion “BEFORE” the event and tell us what you want from us before hand not afterwards!

  25. The truth behind the FSA review 7th September 2010 at 9:20 am

    Here is the truth – Platforms offer a future for IFA’s and threaten traditional providers such as AVIVA who have been behind the pro RDR lobby together with the ABI.This is why we have their pals at the FSA doing their best to destroy this future!

  26. The FSA think a platform itself is a product. It is not! It is the underlying funds that are the products. The use of a platform even if just one platform is a huge consumer advance where allowing true independence of choice i.e. 20 plus fund managers out of a 1,000 plus choice as opposed to just one or two providers. I suspect it is traditional product providers without a platform that have the ear of the uneducated regulator on this issue.

  27. Yes, it would be interesting to know on just what parameters the FSA expects IFA’s to choose one platform over another. It isn’t just a matter of costs, it’s about functionality, facilities, service and all the rest of it. I tried to place an offshore investment case with TransAct earlier this year and there were a few wrinkles that needed to be ironed out. Instead of helping us to overcome these, TransAct did nothing but throw up one obstacle after another. I was never able to deal directly with their offshore office, everything had to be done by e-mail via somebody in London (so every exchange took 48 hours). No matter what we did, it wasn’t satisfactory to TransAct and their local rep was about as much use as a chocolate teapot. Eventually, I became so frustrated and downright angry that I instructed them simply to send the money back and we placed the case (satisfactorily) with our usual platform provider. TransAct are apparently held in high regard by many regular users yet for us they were a total pain in the neck and I will never again try to place business with them. But that’s just me and my experience.

    Does the FSA have any understanding or appreciation os such issues?

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