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What the FCA wants to see from advisers on suitability

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The FCA has begun contacting about 700 advice firms as part of a wide-ranging review of advice suitability which will cover investments, pension saving and retirement income.

Earlier this week, Money Marketing reported the regulator plan’s to collect more than 1,000 client files in total as part of the supervision exercise, with file requests mainly targeted at 500 smaller firms.

Larger firms will have to provide a greater number of files, which should reflect the business’s market share.

The FCA letter – seen by Money Marketing – asks firms for the total number of “advice events”, defined as a single product recommendation. Advice to a couple to take out a product would count as two advice events.

The regulator has also requested a copy of “advice registers”, a record of personal recommendations to include all advice provided during 2015. This should cover recommendations to encash or surrender, as well as referrals to discretionary fund managers.

As part of the advice register, firms will have to detail the number of advised cases including those for insistent clients, any records of funds withdrawn from a client’s pension, and any records of portfolio rebalancing.

Firms will be contacted in May or June with instructions to hand over specific clients’ files.

File reviews are expected to centre on assessing suitability, including copies of suitability reports and the way firms document their investment and research processes.

Clarke Willmott solicitor Laura Hazell says the review may have been sparked by February’s National Audit Office report, which questioned the FCA’s ability to show its effectiveness on misselling.

She says: “They were saying that the FCA does take lots of action on misselling but it can’t measure the effectiveness of the steps that it takes. So it may be that they have decided that prevention is better than cure, and they want to pay closer attention to what is going on at the outset as a way of addressing the outcome of that report.

“A lot of firms are going to be quite shocked, and even if they have done nothing wrong, it’s bound to make some of them nervous.”

In the FCA’s 2016/17 business plan, published this month, the regulator identified suitability as one of its key risk areas for the coming year.

It said: “Advisers may not always give consumers the most suitable investment advice, may offer a limited range of products or have staff reward schemes that motivate sales over suitability.”


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FCA in mass file check to review advice suitability

The FCA is writing to around 700 advice firms ahead of a supervision exercise focusing on the suitability of advice. The regulator will collect over 1,000 client files in total as part of the exercise, with file requests mainly targeted at 500 smaller firms. Larger firms will have to provide a greater number of files, […]

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Conflicts of interest and suitability failings: How wealth managers are failing their clients

Serious concerns about high portfolio turnover and conflicts of interests, as well as “significant” suitability failings, are putting wealth management firms’ customers at risk, the FCA has found. The FCA’s thematic review of 15 firms, published this morning, found two-third are falling short of the regulator’s expectations and five reviewed may be subject to enforcement […]


FCA ‘deluded’ over FOS and suitability letters

Advisers have accused the FCA of being “deluded” by telling those with concerns about suitability letters to speak to the Financial Ombudsman Service. Speaking at a Distribution Technology conference in London last week, FCA technical specialist Rory Percival reiterated a view he made public in November that suitability letters are too focused on defending potential […]


Alan Hughes: The FCA’s key messages on due diligence

In February, the FCA released Assessing Suitability: Research and Due Diligence of Products and Services. The paper is loosely themed around suitability but deals mainly with the role of research and due diligence in the assessment of it. As suitability is the cornerstone of both good advice and much of the FCA’s supervision of advisory […]


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. Is this as a response to client complaints or an exercise to find something to do to keep a certain level of staff at Canary Wharf?

  2. I shake my head at the complete incompetence of our regulator…. if this “review” has been kick started by their (fca’s) inability to stop miss-selling (NAO report) why oh why, are they doing a “PAST” !! business review ? surely the time and money is better spent looking forward !!

    Its little wonder they are always behind the curve and backward thinking,

    And why oh why, are they (FCA) concentrating on the small or smaller IFA from my understanding we have very little by way of complaints our risk to the market (individually) is minimal,

    Now let me think ? who has been the biggest culprit on complaints, miss-selling and poses the biggest risks to the market place ?

    Just like the FSA before them…… lets pick the lowest hanging fruit first, they have no “REAL” representation, and don’t have the money or clout to answer us back and or challenge our (FCA) decisions !

    I really don’t have an issue with my files being checked as part of periodic reporting (I did my last one start of 2013), but this stinks of …. we (the FCA) have been told off, and some-one, some where will feel the end of our boot connecting with the danglie bits in ones trousers, and who better to bully (George wants us to lay off the bigger boys) than the small boys !

    Human rights (ignored) victimization (accepted) consumer champion (retrospective)……. New FCA strap line.

  3. Folks: This is just the start. Banks are now off limits. To maintain the empire they need to find a new bogeyman – and guess who that will be?

    • So whats the plan then Garry ?


      Should we just put a bit a perfume behind our ears, because considering what they (the FCA) do to us and will keep doing to us we may as well get them in the mood !

  4. Amazingly the data required is in a different format to that required for the RMAR namely:

    • non-pension investments
    • pension accumulation
    • retirement income

    This is requiring a complete reworking of the complex tables we paid tens of thousands of pounds to create for the RMAR just a short time ago.

    Also unless your RMAR is due on 31 December each year, the data will need to be taken from two separate tables, as they just want 2015 calendar year entries.

    Given the fact that this is specifically targeted at small businesses, why would the requirement be that small businesses have to provide information in a different format and with new business categorized in a different way to the data already required twice a year for the RMAR?

  5. As I have already stated I know the result before they start.

    Only 20% of Suitability Letters will be up to the correct standard, around 40% could do better and they will imply 40% was unsuitable. As always they will not say the truth, that being in most cases the advice was suitable only the letter did not support it. So as in the past we will have headlines of “40% of all advice provided is wrong”.

    Now I might be wrong and maybe they are looking at the smaller companies because they do have the lowest number of upheld complaints! However, after 35 years in the industry might hart cannot justify supporting this.

    There I have just saved millions, lets see if I am correct.

  6. Plan:

    1) The Banks got off the hook by good representation. You are now in the hook so you need representation and pay for it. The EU banks pay 300m Euros a year to be represented. UK IFAs cannot scratch together £1m.
    2) Establish the perimeters of this fishing trip before it starts.
    3) Use back benchers and the TSC to start to question why we need to spend £500m+ on regulation if they are going not avoid regulating the major miscreants the banks

  7. Douglas Baillie 21st April 2016 at 4:01 pm

    My new business journal and my records are up to date and configured in accordance with our regular FCA returns. However, they are not held in the format that the FCA spread sheet expects, and reformatting these records to suit the FCA’s demands within such a short timescale is a hugely time consuming job for a small, two adviser firm, with only two administrators!
    Surely this unrealistic requirement must be the same for just about all of the 700 adviser firms?

  8. 1) The Banks got off the hook by good representation. You are now on the hook so you need good representation and you will need to pay for it. The EU banks pay 300m Euros a year to be represented. UK IFAs cannot scratch together £1m.
    2) (Alternative to 1) Fail to fund proper representation and as DH suggests get used to bracing yourself for a persistent rearward invasion
    3) Establish the parameters of this fishing trip before it starts. This is the alternative to the cancelled review on Banking Culture. What are they seeking? Get them challenged now not when they return to the media with horror stories.
    4) Use back benchers and the TSC to start to question why we need to spend £500m+ pa on regulation, particularly if they are going to avoid regulating the major miscreants – the banks.
    5) Restore links with the Consumer’s Association and the media to get pro advice stories out
    6) Understand that the cost of regulation is going up £15 per working day for every adviser. Libertatem membership is at worst a £1 a day per adviser
    7) So stop feeling sorry for yourselves and join Libertatem before it too late to do anything

  9. It is probably easier in the long run to just accept that the whole system is drastically rigged against smaller independent advisers, and these boot boys won’t leave it until we cease to exist. As Garry points out above, we can’t scratch up £1 million, whereas banks can spend that a day smoothing their way forward. Retire, go work in a bank (good luck) or join SJP. Or become a very indignant, flattened small creature under the tank tracks.

  10. I said on a previous post and I’ll say it again. The industry led by the very people who made you jump through the RDR hoops haven’t even taken on board their own aims and ideology.

    It’s still all based on product flogging and not on advice. Advisers advise, the client makes the choices, but pays for the advice whether or not a product results. As I understood it, that was what the RDR was meant to achieve. The Canaries then saw that advice was only for the better off and panicked. Their lords and masters wanted everyone to engage in saving, notwithstanding their humungous debts. So the FAMR was spawned in desperation. Now we will have the banks flogging low value (and probably high charging) products with lousy retention rates. So FAMR = Back to the Future. Hooray!

    • Very well put Harry, I couldn’t agree more. The regulator still has a regulatory system designed to regulate flogging products (not that it did too well on that front!) and the advice process is not about that any more, which is great for the client and professional advisers, not so great for those that can no longer afford advice. I would argue that a large part of our advice process is now ‘un-regulated’ because unless there is a regulated product at the end of it then I am not sure that the regulator knows how to deal with it! However the outcome usually turns out with some form of regulated product so the process then becomes ‘backwardly regulated’. I believe the IFA community need separate regulation as Professional advisers are becoming more and more removed from the sales environment that the banks are seeking to get back into and the rules that should apply to them do not work for us.

      • Very well put. When the banks come back into the market they will flog a basic range of products dressed up as ‘full’ advice with a tiny disclaimer about them being tied. Mr Joe Public will not be able to tell the difference between us and them, we’ll all be regulated in the same way and we’ll foot the bill when the banks get it wrong.

        Maybe we need a new regulatory structure that covers advice and those that give it not products. The problem with that is that the FCA will need to have suitably qualified assessors working for them and we know they don’t want to bother themselves with all that.

  11. Douglas Baillie 22nd April 2016 at 3:05 pm

    Just wait until you see the new PI Insurance excesses and exclusions that are now bound to follow, making your expensive policy worthless.

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