How many people are familiar with the snappily titled “The Responsibilities of Providers and Distributors for the Fair Treatment of Customers”?
It’s a surprisingly readable nine page document buried at the end of the FCA Handbook, after Perimeter Guidance and before Unfair Contract Terms, both sections considerably more turgid.
Originally written in 2007, I was delighted to see that this document survived the transition from FSA to FCA.
Why am I so excited by this?
Because in this blissfully short guide to regulatory expectations, advisers and providers get some really straightforward explanations of what providers should deliver in terms of product design, information to customers, information and training for distributors, and post-sale responsibilities. We also see what distributors should deliver in terms of considering financial promotions, providing information to consumers and selecting providers.
It says: “This Guide is not intended to imply that a firm must take on the regulatory responsibilities of other firms in the distribution chain nor that there is a requirement for any firm to ‘police’ any other firm in the chain.”
Can this mean that all parties in the product design and distribution chain are entitled to rely on one another doing their jobs properly, in accordance with regulatory principles and rules?
Can this be what lies behind the assertions made by the regulator that that if a fund manager or life company has published facts on a certain product then advisers do not need to conduct further due diligence?
It makes sense really. The overarching regulatory principles of skill, care, due diligence, integrity, treating customers fairly, considering information needs of consumers, and the requirements for clear fair and not misleading communications, and effective systems and controls apply to each and every regulated firm.
But here’s the problem. For this system to work every firm should not just be subject to the rules. It must be held accountable to the rules.
Advisers know what accountability feels like. We are accountable to our clients from one side and the regulator from the other.
There is a clear path for clients to take if they feel that their adviser has not advised them well.
The regulator also has a clear path to tread when it feels that an adviser has not met its expectations.
But to whom is a product provider accountable?
GIf a client tries to complain to a provider the stock answer is that as an advised customer they should take the matter up with their adviser.
Advisers have no realistic ability to claim against providers who do not come up to the standards that the regulator has set out, here or elsewhere. Anyway, advisers are not customers, or eligible complainants at FOS or FSCS, and do not have to be treated fairly.
This leaves advisers totally dependent on the regulator holding providers to account when the provider fails live up to expectations.
The regulator “with teeth” should use them instead of removing its dentures when things get a bit tough, and then perhaps “the integrity of the UK financial system” really would be enhanced.
Gill Cardy is managing director of IFA Centre