CHANGES ARE AFOOT: THE ONES TO WATCH IN 2024

Last year was a pretty significant one 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’re back in the saddle and have shrugged off the post-Christmas inertia, we thought we’d whip out our crystal ball and take a look at the hot topics we think will be keeping us busy in the next 12 months. Fasten your seatbelts!

Retirement income advice – thematic review

We covered it in more detail back in October – read the full blog here – but 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 benchmarking exercise was carried out as part of the Consumer Duty implementation process, the effects may be minimal.

We will provide more guidance when the results are released, so watch this space…

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 have just published a more detailed blog on this issue, as it will affect many of our readers. In the meantime, we would urge you to review the consultation paper, think about the impact it may have on your firm 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. Our clients can find our technical note available in the document library and we would urge you take a look.

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.

You need to ensure your client knows what sustainable investing is and explore their reasoning and thoughts on the subject. Don’t forget to record these conversations in your file. Be alert to ESG prompts, for example, is he/she doing Veganuary or have they just bought an electric car? These are great conversation starters that allow you to explore their views in more detail.

The definition of vulnerability

We believe how you define vulnerability and how you identify and treat vulnerable clients is going to 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 it is likely 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 or simply muddies the water further. 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.

Again, when the final guidance is published, we will provide more detailed analysis and advice.

Politically exposed persons (PEPs)

In September, the FCA announced a review of the treatment of PEPs by financial services firms.

PEPs and sanctions have not been reviewed since 2017, so expect changes to be on the way for how you deal with these types of clients.

The review is looking carefully at how firms deal with PEPs based in the UK. The results are expected by the end of June and the regulator has promised to take prompt action if any significant deficiencies are identified in the arrangements of those assessed.

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 affecting our industry helpful. We will be providing more information as it becomes available and will be making sure 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, or would like to discuss a specific matter in more detail, don’t hesitate to contact us on (0161) 521 8641 or email: info@b-compliant.co.uk