ATEB Consulting director Steve Bailey highlights key issues on the FCA’s radar for the coming year.
The FCA’s immediate current focus was summarised in a speech delivered by Therese Chambers, the FCA’s director of Consumer Investments, at the PFS’s Festival of Financial Planning, held in Birmingham in November in which she highlighted the FCA’s key priorities for the financial advice industry.
We have written in more detail about some of these topics recently, for example Consumer Duty, and you might wish to browse previous articles when you have a spare moment.
From ATEB (and other articles) on Consumer Duty, firms should have a reasonable grasp of the rules that will apply in order to meet the following three ‘obligations’ –
1. A firm must act in good faith towards retail customers.
2. A firm must avoid causing foreseeable harm to retail customers.
3. A firm must enable and support retail customers to pursue their financial objectives.
However, it’s more than just rules! While it is important that firms meet the requirements, firms will need to embrace cultural change.
In her speech, Chambers emphasised that “cultural change cannot be achieved simply by adjustments in governance, MI, and processes. Yes, these can support cultural change, but firms’ senior management need to clearly demonstrate to the rest of their colleagues throughout their firm what putting good consumer outcomes at the heart of their business means. Firms which view the new Consumer Duty as simply a change to governance and processes are doomed to fail from the start,” she warned.
The desired outcome of all this is that the FCA wants “to see more consumers who can afford to do so investing their money safely”. The Regulator warns that “this will only occur in a better consumer investment market”. Of particular note is the comment that “financial advisers play a major role in helping or hindering this better market’.
Consumer Duty is clearly intended to ensure that advisers help rather than hinder the desired ‘better market’.
Other areas of focus
The FCA has set out many other areas of focus in its Business Plan for 22/23 and the May 2022 Regulatory Initiatives Grid – both of which are worth a look. Main items of likely interest and relevance to readers include:
- ESG – a raft of new requirements around sustainable finance is already nearing launch. Not much immediately affects advice firms but watch this space
- Appointed Representatives – new rules have recently been put in place to firm up how ARs’ and Principal firms are supervised
- Resilience – the FCA is concerned to ensure that firms are resilient both operationally and financially.
Our View
This year it is a little more difficult this year to predict what might be coming over the regulatory horizon. This is because of the likelihood that many current rules, particularly those arising out of MiFID II, may well be amended or scrapped altogether in line with the Government’s stated desire to move away EU-driven rules that are considered not to support UK Financial Services very well.
We have already seen some early signs with costs disclosure requirements likely to be significantly eased and amended.
As some of the MiFID II rules were undoubtedly better in theory than in practice, we will welcome any review that results in more practical rules.
