There are many strands feeding into the FCA’s review of advice suitability, and not all of them are to do with advice.
The National Audit Office has been scathing of the regulator’s inability to show how it is tackling misselling and, more broadly, how it is delivering value for money for the firms that pay its fees.
Interestingly, European regulators have also found the FCA wanting in terms of some its supervisory processes, with the European Securities and Markets Authority noting while the FCA is good at putting out guidance, it is not so good at following up where issues have been flagged.
So the suitability review may, at least in part, be looking to address some of these concerns.
Of course, the review first and foremost should be about checking whether advice is suitable. What good looks like, to paraphrase the FCA, would be an outcome that delivers meaningful best practice for advisers, as well as beginning to flush out the minority of rogue firms that should not be giving advice in the first place.
One hopes the final report will deliver a great deal more insight than the regulator’s anti-climatic due diligence paper.
The other aspect of all this is suitability reports, which are being assessed as part of the wider file review process.
The suitability report has long been a thorn in the side of both advisers and the FCA. The regulator first riled the advice profession in 2014 by telling them suitability letters were too long and too focused on defending potential complaints.
It further frustrated advisers last year by telling them to “ask the Financial Ombudsman Service” if they were struggling to compile clear reports.
When suitability reports are too dense to understand, it is not only the client that loses out, but the adviser too. Money Marketing has heard anecdotally of one client that was so confused by the contents of their suitability report they sought the advice of a rival firm to make sense of it.
If this review can go some way to help deliver simpler, more engaging suitability reports, with all the necessary reassurances for both adviser and client, it would mark one giant leap forward for the advice profession.
I know from speaking to a number of advice firms that some have already started to find a way forward on this important issue.
Natalie Holt is editor of Money Marketing. Follow her on Twitter: @Natalie_Holt_MM