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The long, patient wait for FCA answers on suitability

First things first: I am not about to hammer the FCA for taking its time to report back to the market on its high profile suitability review.

For one thing, firms which took part have had their feedback, albeit on an individual basis.

The second point to mention is overall conclusions from the review do not appear to be that clear- cut, at least in terms of headline findings. One figure that has come up in conversation is around a third of the adviser sample passed on disclosure, though this has not been substantiated.

What is overwhelmingly clear is the issues being picked up by the review have very little to do with suitability at all, and largely relate to disclosure. To put it another way, the FCA wants advisers to be clearer with clients on what they are paying.

Dancing around disclsoure

At first glance, it is startling that the proportion of advisers who are getting disclosure right are in the minority. But that is not the whole story, and the regulator is probably aware of that.

This review was never about “cracking down” on advisers, but helping them with best practice. Several figures in the advice and compliance sectors say the FCA is entering into this in the spirit of encouraging firms to communicate better, rather than haul advisers over the coals, even if in some cases the regulator is nitpicking over certain issues.

Nevertheless, if the review has found so much scope to improve the regulator may be wary of how it frames its findings for fear of being accused of adviser bashing.

At the same time, there is the usual clamour from consumer groups that call for charges to be more transparent, more easily comparable and more widely available.

Meanwhile, advisers know full well precise costs are only worked out at a certain stage of the advice process, and are reluctant to sell on price rather than value.

There are other issues at play which the FCA may be concerned about. Contingent, percentage-based charging remains prevalent, and is usually facilitated through the product. Clearly, advisers need to ensure clients understand what they are paying, regardless of how they do so.

Given all of the above, there is a nuanced environment the FCA is contending with. If the outcome of the review is meaningful good and bad practice examples, then it matters less that it took over a year to get it.

Anything less, though, and we will all have to hammer the FCA for answers. Myself included.

Natalie Holt is editor of Money Marketing. Follow her on Twitter @Natalie_Holt_MM



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Comprehensive disclosure of charges and costs isn’t that difficult but it is time consuming to calculate and set them all out in such a way as to render them bomb-proof against any accusations of obfuscation. Whether clients actually read, understand and take issue with any of it all is, of course, debatable. I would hazard a guess that hardly any conduct any sort of comparison with what may be available from another source. Even those who consider the stated charges to be a bit on the steep side probably just accept them as being what they are and that’s that.

    As for suitability, given that all clients and their financial circumstances, ATR, CFL, aims, objectives, budget, etcetera are different, this issue is often subjective and can be interpreted in a variety of ways, not to mention that complainants often display recollections at variance with what was actually discussed and agreed prior to the original transaction. So any definitive guidance from the regulator in this area is unlikely to be forthcoming.

  2. From my experience, this might be overstated. Our file passed suitability but was failed on disclosure as we only had an old pre RDR terms of business on file. However, full disclosure was given on writing, in Pounds as well as % ages in 3 different places in the file (suitability letter, emails etc) – usual tick box mentality from FCA

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