On the theme of compliance and following on from Cathi’s Eclipse from the end of June, the FCA’s Information Request has been the hot topic for the work we have been doing with our firms’ the last five weeks. The reaction from most firms was initially… ‘could have been worse’ on the 28 question Information Request, which has then later transpired to HOW am I supposed to get that data?!
On reflection, the majority of the questionnaire is questions firms will simply just ‘know’.
The more fiddly bits are;
- Reasoning for initial advice. Don’t overthink this question. This tops the list on questions we have received from firms. The FCA is trying to ascertain WHY people access financial advice, we know that most have multiple objectives. Use the free text box to explain this.
- Firm Reference Numbers for third parties.
Focusing on the latter, we must remember that the FCA cancelled their Assessing Suitability Review 2 (way back in 2020), so outside of the Ongoing Services Review, and the Retirement Income Review, they haven’t really had their eyes on the industry, just certain segments of it. This is likely the start of their data-led approach, and focusing on what is the biggest risk for the advice sector… the advice itself!
When looking at file checks, the FCA wants to understand what your firm's risk strategy is with regards to mitigating unsuitable advice, or remedial actions where you have highlighted potential unsuitable advice or poor outcomes. The FCA has been consulting on redress and their expectations on firms, so again, a clear area of focus.
We would typically expect a firms' file checking process to be aligned with an adviser’s competency, and the risk of the advice being given. Post-sale checks on a 10% basis for competent advisers is fairly industry standard, and then pre-sale on higher risk areas, or also areas which are not advised on frequently. A lot of firms will conduct internal checks, but often these are regarding disclosure and process. Firms should question who is challenging the fundamental suitability of the advice, which is ultimately what is going to lead to the costliest of complaints should it ever go wrong. In the ‘interesting stuff’ section, I’ve linked the Decision Notice from the FCA on Neil Woodford, which shows just how wrong things can go!
In addition to your process for ‘what’ files get checked, you need to ensure you have a process for the scenarios whereby feedback highlights unsuitable actions. What does your firm do in terms of remedial actions? And, as ever, where is this recorded?
Away from that exciting read, the Information Request has challenged firms to look at processes such as file checking but also questioning back-office selection. The FCA has very much emphasised their position as the soon to be data led regulator, so there is a potential for more of this information to be requested on a more frequent basis.
On the Information Request, ensure you submit by your firm's deadline.
Right, that’s my sign off from the land of compliance. No wine recommendations from me, I’m recovering from Birthday Week, which may have included an iconic trip to see Oasis. But if anyone has any tips for the 16:30 at Ascot, I’m all ears! (Okay, I lied, Birthday Week is extending into a second week… As it should!)
Have a great one!
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