The top 15 risks facing intermediaries when conducting business with retail customers have been set out in the Financial Services Authority’s (FSA) 2012 Retail Conduct Risk Outlook (RCRO).
The FSA wants advisors to review the RCRO in the areas in which they operate to ensure they understand and can address the risks they face. In particular firms are warned to review the RCRO carefully when entering new business areas. A copy of the Outlook appears here, Its overall aim is to ensure that the risks do not result in poor outcomes for consumers.
The 15 broad risk categories are as follows:
1. Aligning business models to the fair treatment of consumers
2. Complexity in retail investment products and services
3. Firms’ responses to regulatory and/or legislative change
4. General insurance
5. Governance of funds in life offices
6. Host authorised corporate directors
7. Inadequate complaints handling
8. Investment propositions
9. Investment risk profiling
10. Investor compensation protection
12. Pensions and retirement planning
13. Product bundling
15. Systems and controls weaknesses in the network model
The Chartered Insurance Institute (CII) has published its own policy briefing guides for general insurance & life and pensions intermediaries, and retail intermediaries, which are available here.
James Burgoyne, Director, Brunel Professional Risks says: “This is a useful guide for financial intermediaries as it sets out clearly the FSAs current thinking about risks firms face when dealing with retail customers. Effective risk management is essential for advisors and we offer risk management services to intermediaries and brokers to help them secure the most competitive Professional Indemnity Insurance (PII) rates.”