The Model Office Blog

So, the FCA start the new decade with a bang by writing to all Retail Investment Adviser firms with their latest directives surrounding regulatory concerns and risks…

Their Dear CEO letter of 21^st January 2020, showcases that the FCA:

1. Highly value Financial Advisers and their services, but
2. Are concerned about de-accumulation and will focus on this is the Advice Suitability Review 2 (ASR2)
3. Focus on PROD as they are concerned about excessive adviser charges and lack of client segmentation so they effectively do not trust the industry is as client centred as it may believe it is
4. Is concerned on DB pension transfers and associated scams
5. Feel there is more to be done in and around failing firms and compensating consumers and we would add protecting vulnerable clients and stopping pheonixing.

So, where does this leave us at the start of a new decade?

Firstly, firms need to take ownership for their business professional practice, this means showcasing where they are making a real difference to their clients financial planning needs. This can be done by:

1. Providing case studies on how client challenges are being met
2. Segmenting clients based on demographics, behaviours and their assets so aligning with PROD 3.3 and product manufacturer’s product distribution requirements
3. Aligned to point 2; build a de-accumulation service which focus on two strategies;
   1. Differentiated products, service, costs and charges for this segment
   2. Taking a holistic view on any wealth transfer and engaging the next generation of savers and investors. With over 4TR of assets probably on the move over the next decade it will be worth it!
4. Ensure you engage with the FCA’s Duty of Care so you ensure your service cover a spectrum of client’s needs across all financial planning services
5. Use tech to ensure you reach out to your clients in a simple and user-friendly manners whether that’s cashflow modelling, a client portal, appropriate research tools and attitude to risk
6. Ensure your research and due diligence is watertight across your investment and wealth committees so your centralised investment platform or professional management services are suitable
7. Create a culture for challenge across your business operations and within your client meetings and offer alternatives. This will help enormously with ASR2 as in 2017 the FCA saw that 93% of advice complied with suitability rules yet this was weighted towards simpler areas of advice. This means more governance, systems and controls around advice strategy which is actually required as part of the Senior Managers and Certification Regime and training and competence

RegTech can help (off course) showcase you are compliant to your team and your regulator which will in turn help alleviate pressure on compliance time and costs.

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