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FSA warns IFAs of increased conduct risk

The FSA has warned that advisers looking to broaden their income steams by moving into new product areas, where they have little knowledge or experience, may face increased conduct risk.

According to the regulator’s Financial Risk Outlook 2010, published today, falling sales of retail investment products and mortgages have placed pressure on the profitability levels and revenue streams of some intermediaries.

The FSA says: “Mortgage intermediaries have been particularly affected and over three quarters have noted that current economic conditions are having a negative impact on their cash flow. Over 60 per cent also report that they are experiencing a negative impact on the level of capital reserves they hold.

“Some intermediaries could have increased incentives either to leave the industry or to try raising revenue by increasing sales of other products. The movement of intermediaries into product areas where they have little or no experience could potentially give rise to conduct risks.”

The FSA says while growth is expected to continue in the platform market, particularly due to the RDR, it warns firms against an over-reliance on platforms.

It says: “The ability of advisers to deliver competent ongoing advice could be compromised if they become too dependent on a platform’s services, for example, by ignoring investments that are not held on the platform.

“Firms should not become overly dependent on a platform’s services and should offer consumers suitable products, whether or not they are available on a platform.”


Graphic Content – August

Given the release of employment data from the US on 5 August, we wanted to focus on employment data in this month’s Graphic Content. The Graphic Content below shows us that young and middle-aged workers were hit the hardest by the Great Recession and have never caught up. Since the job market started to recover […]


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There is one comment at the moment, we would love to hear your opinion too.

  1. Take that as a warning then? Are platforms riskier than individual investment products?

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