The FSA has warned IFAs to start paying much greater attention to risk management as they change their business models ahead of the RDR.
Speaking at the annual Platforum conference in London FSA conduct and risk division supervisor Rory Percival said that risk management and oversight was the “gaping hole” in the debate currently surrounding RDR transition.
He said: “To a greater or lesser extent, intermediary firms are changing their business model, usually at least in part in response to the RDR. Where business models change, firms are in a new place, and they have new or different risks. It is of particular concern that among the 12 firms that we reviewed, not one had adequately reviewed their management and oversight in light of the changes they had made. In most cases they had not considered this issue at all and this is simply not acceptable.”
Percival argued that there has been extensive discussion about the business and investment implications of using platforms and the transition to the RDR.
But he added: “The gaping hole is discussion and engagement of risk management and oversight changes that need to go alongside these general business changes.
“Hence our challenge to the industry today: our challenge is directed at firms, compliance consultants, transition consultants, the media, andconference organisers. The challenge is to put this subject on the agenda, engage with this issue, start discussing ways forward. Let’s resolve this now before it becomes too big a problem and we find other firms like Moneywise that we have to take through the painful enforcement process.”
The FSA fined Moneywise IFA £19,600 in September for platform advice compliance failings.