PIMFA
CHANGES ARE AFOOT: THE ONES TO WATCH IN 2024
Last year was pretty significant in the world of FCA compliance. Consumer Duty dominated the headlines and fundamentally transformed the way the industry operates.
So, what does the FCA have in store for us in 2024? Certainly, the pace of regulatory change shows no sign of slowing down.
Now we’ve shrugged off the post-Christmas inertia, we thought we’d whip out our crystal ball and take a look at the hot topics that will be keeping us busy in the next 12 months.
Retirement income advice – thematic review
We’re still eagerly awaiting the results of the FCA’s retirement income market review.
The regulator was keen to see how the 2015 pension freedoms impacted on the quality of advice clients receive, particularly following the implementation of Consumer Duty and we expect the results of this review to be key to assessing how firms have adopted the regulations.
It will probably mean work for some firms, but if a Consumer Duty benchmarking exercise was carried out, the effects may be minimal.
Capital deduction for personal investment firms
We are expecting the FCA to publish a policy statement in this first quarter, following its consultation paper on capital deduction for redress, which was followed up by a Dear CEO letter to affected firms.
There will be at least six months between the publication of the policy statement and the rules coming into force to allow firms to prepare. Implementation will then be staggered over another six months to fall in line with reporting.
We would urge you to review the consultation paper, think about the impact it may have and consider submitting a response to the FCA before the March 20 deadline.
ESG – are you ready to have the conversation with clients?
The Anti Greenwashing and Sustainability Disclosure Requirements outlined in the FCA’s November policy statement apply to all firms, so understanding and adhering to them is essential.
It is important advisers have an awareness and understanding of the rules so you can discuss ESG products clearly and accurately with consumers and we are expecting further consultation on how the regime will apply to portfolio managers very soon. If you aren’t comfortable talking about ethical preferences, it’s time to take action to plug the gap.
The definition of vulnerability
We believe how you define vulnerability and how you identify and treat vulnerable clients will come under much more scrutiny this year.
Consumer Duty placed the emphasis on good customer outcomes and a questionnaire issued to stockbrokers and wealth managers before Christmas asked specifically for their definition of vulnerability and how many vulnerable clients they have. This leads us to think there is going to be more focus on how firms make sure staff can identify vulnerability and what action should be taken when they do.
Advice Guidance Boundary Review
A discussion paper released before Christmas set out proposals for bridging the gap between financial advice and other forms of consumer support.
The FCA wanted feedback by the end of February, so we will know later in the year if the rules surrounding simplified advice are any clearer.
The paper proposes plans to help consumers better identify their financial needs and access fair value advice, plus support for firms who want to help retail customers but fear drifting into the realms of advice.
It will be interesting to see if the final guidance makes things clearer. Our initial reaction was that it might help large organisations, such as banks, but it is still going to remain an area fraught with risk for IFAs.
Politically exposed persons (PEPs)
In September, the FCA announced a review of the treatment of PEPs based in the UK by financial services firms.
PEPs and sanctions have not been assessed since 2017, so expect changes to be on the way. The results are expected by the end of June and the regulator has promised to take prompt action if any significant deficiencies are identified.
Consumer Duty is not going away
Yes, we know you’re sick of hearing about it, but the milestones are going to keep on rolling around anyway. July is the deadline for submitting your first board report and at the end of the same month, the duty will apply to all closed products and services as well.
Hopefully you’ve found this whistlestop tour of the main regulatory issues helpful. We will be providing more information as it becomes available and will ensure our clients have the tools and assistance to make any necessary changes to their policies and procedures.
If you have questions regarding any of the changes outlined here, don’t hesitate to contact us on (0161) 521 8641 or email: info@b-compliant.co.uk
Vicky Pearce, Director, B-Compliant
To find out more about how B-Compliant can help, please visit https://b-compliant.co.uk/
