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Regulation, regulations and more regulations

Financial Advisory

14 October 2021

A Meeting of Minds Winning AdvisersAdvisorsBusiness developmentCentralised investment propositionsFinancial AdvisoryMeeting of MindsRegulationWinning AdvisersWinning AdvisersYour business

Expert: Henry Cobbe, Elston Consulting, Facilitator: Roderic Rennison, Rennison Consulting

THIS DISCUSSION COULD FILL A DAY, BUT LET’S INSTEAD TALK OPPORTUNITIES, DEVELOPMENTS AND INNOVATIONS WITHIN THE SPACE RATHER THAN THE MERE COVERAGE OF REGULATORY MEASURES - IMPORTANT AS THEY ARE

Background

  • There is a growing regulatory focus on Value for Money (Asset Management Market Study)
  • There is also a growing regulatory focus on CIRPs – Central Investment & Retirement Propositions
  • Also, under SMCR, business owners are responsible for ensuring appropriate CIRP is in place
  • Many of the participants in the roundtable were concerned by the burden of regulation and specifically by: 
    • Annual Review Letters
    • ESG and what is expected
    • The sometimes-conflicting advice they receive on particular matters, sometimes from external compliance consultants

Henry Cobbe’s main points...

  • Intermediaries should take the time to read the FCA Papers that are relevant to their sector
  • They should also respond to requests for input to influence the outcomes
  • There are misconceptions about what the FCA do and do not require – for example:
    • In relation to the use of Attitude to Risk Questionnaires, and that the actual requirements, if any, will be clearer if the time was taken to read Policy Statements and Finalised Guidance
    • With regard to COBS, intermediaries are accountable for suitability, but it is important to be aware of what COBS actually says
  • The FCA should have a greater focus on dealing with the bad apples in the sector
  • RegTech i.e., the use of technology in relation to compliance is a growing aspect to focus on

Areas of regulatory focus

Henry outlined and discussed the following areas as being ones that intermediaries should have knowledge of:

PROD3.3

Builds on FG12/16

  • Client segmentation and target market definitions
  • Product Governance policy with designated policy owners and evidence of product due diligence and approvals.

PS19/21

For non-advised market

• Providers to contact customers direct re retirement options if not receiving advice. Fact of advice fees being paid is not evidence that advice is being given. Advisers are obliged to compare drawdown recommendations to Retirement Pathways under COBS19.2.2. (RU64). Consider workplace price cap of 0.75% all in (excluding advice).

FS21/8

Property OEICs

  • Feedback to consultation paper on liquidity mismatch in authorised open-ended property funds.

FG21/3

  • Pension transfer advice

PS20/6: Ban on contingent charging; Abridged advice; 15 hours of pension transfer specific CPD on an annual basis, 9 hours of which must be structured, and 5 hours must be with an external body.

PS21/16

Workplace schemes

  • Assessing value for money in workplace pension schemes and pathway investments: requirements for IGCs and GAAs.

CP (tbc)

Non-workplace pensions (non-advised)

  • Consultation paper planned for Q2 2021 based on FS19/5, Protect less engaged customers, Role of life styling, Potentially relevant for advisers for comparative purposes
  • Calls for Input
  • Consumer investments
  • FCA/TPR joint call for input: Pension customer journey.

ESG

There was a significant amount of discussion and debate about ESG and how intermediaries should approach the whole area.

Henry made the following points:

  • There is a global drive to getting more focus on ESG
  • Think of it in terms of volatility
  • Understand the risk of each ESG component
  • Ensure and evidence that clients understand and are comfortable with their choices and risks.

What is coming down the tracks

  • Non workplace pensions
  • Liquidity
  • Value for money
  • How to provide more protection for customers.

Summary

Henry summarised by making the following points:

  • Regulators are trying to do the right thing, do not always do it in the right way
  • When looking at a firm’s regulatory obligations, go back to basics and look at the Rules
  • Look at technology to provide solutions where they exist
  • Assessing Suitability Requirements 2 is important in the context of CIRPs
  • Think of ESG as another facet of risk
  • Do not be overly influenced by compliance suppliers or providers; reach your own conclusions by doing the required reading

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