The Model Office Blog

Governance Risk and Compliance

[fa icon="calendar"] Jun 7, 2019 10:07:00 AM / by Chris Davies

With Model Office’s recent business trip to Australia in mind, this week we focus on how the new era of accountability within financial services seems to be sweeping through regulatory authorities world wide like wild fire.

The FCA’s latest call for input on its Retail Distribution Review (RDR) and Financial Advice Market Review (FAMR)to assess its success in meeting initial objectives across conflicts of interest, poor treatment of consumers, access to advice and misleading communications plus the Senior Managers and Certification Regime mean that advisers really have to evidence they have the fingers on the Governance, Risk and Compliance (GRC) pulse. 

The Royal Commission in Australia recommends the industry:

* Create a new disciplinary system for financial advisers, with all advisers required to be registered. A single disciplinary body would oversee the system.

* Grandfathered provisions of conflicted remuneration should be repealed as soon as possible.

* The current cap on commissions for life risk insurance products should be reduced and ultimately set at zero.

* All remaining conflicted remuneration exemptions should be referred with a view to banning them outright.

* All banking licence holders be required to report "serious compliance concerns" about individual financial advisers to ASIC on a quarterly basis.

As you may see this is somewhat behind the UK and indeed maybe viewed as pre RDR style in its approach, but it’s a start and the Australian Market is now beginning to wake up to the need to ensure they have management information and data aligned across their GRC strategies to ensure they can prove and know they comply.

The key here is the focus on fiduciary care and a move to self-regulation. In the UK this is compounded by the SM&CR moving individual culpability away from Civil law to the FCA becoming the judge and jury.

With a need for firms to ensure they know have the right people in the right roles with the right skills and responsibilities, FCA input is being sought under a number of headings including: access to advice and guidance services; affordability of advice and guidance services; value for money; the role of regulation; changes to consumer needs; and market developments and future trends. The FCA has already undertaken some work in these areas summarised below and wants to build on this as part of the RDR and FAMR review:

  • Access to advice and guidance needs. The FCA published an interim consumer research in August 2018to inform ongoing work in relation to FAMR. It wants views on: how different groups consumers access appropriate advice and guidance; possible barriers to consumers accessing advice/guidance that meets their needs; ease of comparison of services; and the quality and choice of advice and guidance.
  • Provision of advice and guidance service. The FCA wants to build on its June 2018 Data Bulletinwhich set out key trends in this area. It is seeking views on the key advice and guidance services offered in the market and whether these meet the needs of all consumer groups, as well as whether consumer needs are met by new business models.
  • Changes to consumer needs. The FCA has identified the following drivers of change to consumer needs: demographic change; housing market trends; changes to pension planning; low interest rates and high levels of debt; and technological advancements. The FCA is looking for views on changing consumer needs; emerging market trends and changes that need to be made to the market to encourage consumer interaction with, and good outcomes from, advice and guidance services.

So with all this coming through over the next few months, RegTech will be a good resource for firms to assess where their GRC strategy is at, benchmark their performance against all relevant rules and ensure they have the right MI to improve and strengthen professional performance.

You can download our SM&CR full report here.

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Topics: Financial regulation, Financial business development, fintech, regtech, Risk management, practice management, FCA, advice, HMT, suitability, FAWG, FAMR, MiFIDII, SMCR, Data, GDPR, Chatbot, Culture, Enforcement, supervision, audit, Conduct, AI, Risk,, Accountability, Platforms, PROD, Product governance, digital,, Regulatory, Reporting

Chris Davies

Written by Chris Davies

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