The Financial Conduct Authority (FCA) is undertaking a major review of suitability of financial advice. It has contacted about 700 advisory firms to request client files. The regulator will assess the suitability of advice for investments, pension saving and retirement income.
Around 500 smaller firms have been asked to provide one client file, while larger firms must provide two. Advisers also need to provide records of all recommendations made during 2015. This must include transactions for ‘insistent clients’ (see Brunel News, November 2015) as well as records of money withdrawn from clients’ pensions or referrals to discretionary fund managers.
The review was flagged in the FCA Business Plan 2016/17, which said that the regulator would work to ensure that “advice is of appropriate quality and suitable for consumers’ needs”. It follows the final report of the Financial Advice Market Review (FAMR), which said that there was “scope to improve the quality of, and shorten the time spent on, suitability reports and make them more accessible for consumers.”
“Advisers spend a lot of time and effort on preparing suitability reports,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “If the outcome of the FCA’s review is a streamlining of suitability reports it will welcomed by many. The difficulty will be consideration of the potential for a future dispute or claim of negligence against an adviser, and pre-emptive steps the adviser may wish to take. The adviser’s best means of defence will be an accurate and thorough suitability report. Whatever the outcome of the review, the FCA and professional indemnity insurers will expect advisers to keep well-documented records of their advice.”
Reports on the FCA’s review have been published by Wealth Manager, Money Marketing and FT Adviser.
