At the recent Money Marketing Interactive Conference Harrogate The FCA’s Debbie Gupta, Director of Life Insurance and Financial Advice Supervision, gave a speech on improving advice suitability and explored how the suitability of financial advice can be improved.
We review Debbie’s views and what actions you can take to improve the suitability of your firm’s financial advice.
Improving suitability in financial advice
Debbie is responsible for a team supervising firms that influence long-term savings; from life insurance firms to third-party administrators and crowd funders. In all, around 6000 firms.
This supervision centres around one key question: has the client received suitable advice?
Consumers need to make an increasing number of (and increasingly complex) decisions around their financial futures. The impact of these decisions can have long-term ramifications, with the choices made often unable to be undone or reversed.
What has the FCA learned from its work on advice suitability?
In 2017, the regulator published findings from its Assessing Suitability Review. The review showed that 93% of advice complied with the rules on suitability (split 07% networks and 93% Directly Authorised) But this figure was weighted towards simpler areas of advice.
When the FCA looked at more complex issues – non-workplace pensions, for instance, and both pension- and non-pension-related investment products – the figures were not so positive. Only around 50% of the advice given on defined benefits pension transfers, for instance, was deemed suitable. Here, the potential for consumer harm is high.
There was also the issue of cost and charge disclosure with nearly half firms assessed failing regulatory disclosure requirements.
What is the regulator doing to tackle advice that’s falling short?
Four areas of work dominate the FCA’s approach to unsuitable advice:
What does GOOD look like: Improving standards
The FCA will continue publishing consultation papers and policy statements and running workshops for advisers across the country. It is ongoing, with the next advice suitability review due and the Senior Managers and Certification Regimeon its way this December plus pension consultations.
Tackling firms that cause harm
The regulator’s 2019/20 business plan plans to improve firm’s management information via better use of the data and intelligence at its disposal.
Targeting firms in a focused way and kicking out persistent offenders, the FCA hopes, will enable it to identify problems earlier and to act more quickly to address transgressions.
Supporting consumers
Hearing stories first-hand enables the Authority to identify and understand instances where consumers face, or could be open to, harm. This has been evidenced in the case of the British Steel Pension Scheme, where poor practices were flagged to the FCA by advisers.
Supporting financial advisers
The FCA will both learn and pass on lessons from its continuing work. It is, Gupta said, still seeing too many examples where advice falls short of its expected standards. This is particularly the case in:
So, what can you do?
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