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Tim Sargisson: FCA or R&A?

Advisers spend significantly more of their week in their business than on the golf course, writes Tim Sargisson, so when it comes to reading matter, it is important to be clear where their priorities lie

Let me start by posing a question: how many people reading this piece have taken the time to read the 2019 Business Plan recently published by the Financial Conduct Authority (FCA)? Now here is another: if you haven’t, why not?

I put the same question to a group of financial advisers at a recent presentation and the response was underwhelming. I am not suggesting there is any dereliction of duty in not reading this document. It just came as a surprise that anyone authorised and regulated or holding a control function would not see it as important to read the regulator’s business plan.

The follow-up question at the time was to ask the same audience how many of them played golf. Safe in the knowledge we would have a few golfers in the audience. Of the people who put their hand up, the same hands stayed up over my question about reading updates to the rules issued by the Royal & Ancient. After all, no-one wants, say, to turn up for a round of golf with an anchor putter when its use was banned in 2016.

The importance in reading the FCA’s Business Plan is in understanding the FCA’s direction of travel, thereby ensuring a business remains cognisant of where the FCA is heading. It is helpful in providing comfort that an advice firm is truly aligned with what the FCA expects and where the focus is on a client-centric business delivering excellent customer outcomes.

Granted, it is 50 pages long, with an uninspiring front page and the font is 5-point size. Firms do not, however, need to concern themselves with everything that is in the document and instead should focus on three key parts.

First, the chair’s forward, where he notes, “We will seek to deliver  protection for consumers through a continued focus and governance of the firm we regulate”; second, the chief executive’s introduction and the section on Accountability & Culture; and finally, chapter 6, pages 36 and 37. This is the ‘retail investments’ sector focus, which is where you will find the information of most relevance to financial advisers.

Here, the document states: “Our main concerns in this sector are unsuitable and/or low-quality advice and products, and high charges.” And it goes on to say: “Our 2017 Assessing Suitability Review identified areas where firms could do more to ensure they provide customers with suitable advice and clear communications. We will carry out a second review in 2019 and aim to publish our findings in 2020.

‘Updated baseline’

“This second review will again examine advice and disclosure firms give to different consumers, across different product types and by different types and sizes of firms. It will allow us to assess how firms have implemented the requirements introduced by the Markets in Financial Instruments Directive, the Packaged Retail and Insurance-based Investment Products and the Insurance Distribution Directive. It will also provide an updated baseline against which we can assess ongoing issues within the advice market.

In other words we can expect that, following the Asset Management Market Study and the Investment Platforms Market Study, attention will be focused on the advice sector. This will be across different product types and by different types and sizes of firms.

Clearly the FCA will be keen to understand how firms have embedded MiFID II into their processes – with, I suspect, a real focus on product guidance, understanding how advisers have designed investment solutions for their centralised investment process and advisory services, which work for clients and the different segments of the clients.

Financial advisers spend at least 75% of their week in their business and probably no more than 3% on the golf course. It is important to understand what to read and where the priorities lie.

Published on 21st May 

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