Megan Butler, the FCA’s Director of Supervision – Investment, Wholesale and Specialists, delivered a speech outlining

• the FCA’s key areas of concern and subsequent activity in the advice and investment management market.
• https://www.fca.org.uk/news/speeches/assessing-value-financial-advice

Highlights:

1. Financial advice and investment management is of unprecedented importance to society, now more than ever.
2. The FCA is particularly active in two key areas at present:
   1. defined benefit to defined contribution transfer advice and
   2. high risk investments.
3. Information sharing with industry is vital to the FCA, as the intelligence we receive helps define our work.

Their work is therefore currently concentrated on:

1. DB Transfers –
   1. Poor advice can impact large numbers of clients and impact the public’s trust in financial services, leading to heightened interest from the FCA and subsequent increased activity in this area. Following supervision work, the FCA has found levels of unsuitable advice relating to DB Transfers to be higher than they would like. As a result, the FCA will be widening its DB Transfers work. The main issues are:
      1. Failure to obtain enough information about client needs and personal circumstances;
      2. Failing to consider the clients’ needs alongside objectives;
      3. Inadequate assessment of the risk clients are willing and able to make;
      4. Many issues relating to poor business models.
2. High-risk investments –
   1. Both unregulated introducer firms and SIPP operators’ risk from pension scams are at the centre of the FCA’s focus on high-risk investments.
   2. The regulator is using increasingly sophisticated data analytics to detect high-risk firms and manage poor advice.
   3. The FCA is also working closely with some agencies to deal with pension-related scams and fraud.
3. Whistle-blowing –
   1. Although whistle-blowing disclosures are on the increase in the financial advice sector, cases are scarce compared to other sectors.
   2. Butler offered assurance to all that the regulator treats whistle-blowing with the utmost confidence and records the information securely.
4. MiFID II – there are two key areas of focus for advice firms:
   1. MiFID II product governance introduces stricter controls around the need for firms to assess their target markets to ensure board-level accountability and ensure products are working as intended. As a result, there will need to be greater sharing of information between distributors and product manufactures, which should be underpinned by contractual provisions for the exchange of data.
   2. Costs and disclosure requirements are enhanced under MiFID II, and although the FCA isn’t going to prescribe a standardised format for disclosures either at the point of sale or post-sale, it is engaging with industry-led proposals for templates.

Read the speech – https://www.fca.org.uk/news/speeches/assessing-value-financial-advice