"We want consumers to have confidence in retail financial services markets, with healthy competition based on high standards and firms focused on delivering good customer outcomes." – the FCA
The FCA is turning its spotlight onto the Wealth Management & Financial Advice sectors with a number of high profile challenges in different areas including:
> Consumer Duty annual Board Report due in July 2024
> Identification and treatment of Vulnerable Customers in these sectors
> Review of approaches to Retirement Income Advice for retiring clients
> Ensuring advisers undertake annual reviews with clients where a charge is being made
> Suitability of High Charging Funds for clients
Are you aware of the FCA expectations and good practice in these areas? Do you have sufficient in-house expertise and resource to tackle all of these projects at the same time?
Consumer Duty: the Board needs to prepare and sign off its annual Board paper and report setting out how it is achieving good customer outcomes in all of the four outcome areas and what action it needs to take to improve outcomes.Are you working on your review of Customer Duty and preparing your Board paper yet? Will you be able to meet the deadline of 31 July 2024?
Vulnerable Customers: the FCA wants the sector to pay more attention to how it identifies and treats vulnerable customers given that nearly 50% of firms told it recently that they had no Vulnerable Customers at all. Remember, Vulnerable Customers also includes those at risk of suffering implications from a financial shock and in the current climate large numbers are struggling with the cost of living and keeping up payments on borrowing, mortgages and pension schemes as well becoming increasingly indebted.Are you reviewing your policy and practice for Vulnerable Customers?
Retirement Income Advice: the FCA said it had found largescale poor advice practices as customers are approaching retirement and need solutions to generate adequate income from their investments and pensions. They have written to all firms asking them to review their approaches and provided a new calculator for firms to use to identify income requirements.Are you doing this review and re-training your advisers?
Annual Client Reviews: most advice and investment fees include the provision of annual reviews with clients but many of these are not done either on time or at all, with advisers focusing on new clients' needs and helping clients who ask for help – those who do not might go years without a review of whether their investments are still suitable.Are you doing annual reviews and have you trained your advisers in an approach for these?
High Charging Funds: many complex investment funds carry high charges to pay for the investment management processes underpinning them. The regulator has questioned whether these are appropriate in many cases where customers might need simpler, less complex investments.Does your policy and guidance set out your policy in these areas and do your advisers understand what you expect of them?
How We Help:
If you need to understand the FCA requirements in these areas or would like an external review to benchmark yourself against good practice, we can independently review your policies, procedures and advice approaches. We also provide experienced resource to help support your work and your teams.
As you draft your annual Consumer Duty report, we can also provide a high level review to help you ensure you are on the right lines.
Konexo specialises in working with Wealth Management and Advice firms in all areas. We understand what firms are doing and how the FCA is interacting with them.Can you benefit from our learnings and experience?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.