Regulatory Radar

This issue’s Regulatory Radar looks at news from the FCA and more

1. Pensions Transfer Consultation

The PFS has responded to the UK Financial Conduct Authority’s (FCA) consultation on pensions transfers, underlining the importance of clear guidance to firms.

The PFS has highlighted that contingent fees are not the root cause of poor advice and that a ban will still leave clients putting pressure on advisers to access their defined benefit pension scheme. However, the PFS has also acknowledged the pressure the FCA is under to act on contingent charges, given the comments of the Department for Work and Pensions select committee, among others.

The FCA has said it will respond to the comments in the consultation and publish its final handbook text in the first quarter of 2020. The transition period for different proposals in the consultation will take place over a range of dates. Any ban on contingent charging would take place after a three-month transition period, after the final rules are published, whereas proposed changes to continuing professional development (CPD) requirements for pension transfer specialists would be likely to come into force at the beginning of 2021.  

2. Introduction of the SM&CR

The Senior Managers and Certification Regime (SM&CR) will come into force for financial advisers from 9 December 2019. For most firms, there will not be a huge operational change. Advisers who were part of the Approved Persons regime and who are employees of an advice firm will become certified individuals. That means they will no longer be approved by the UK FCA but will have their competence and fit and properness checked by their employer. Any employer hiring someone to perform a controlled function will have to ask for references from previous employers dating back six years.

The FCA is mainly looking to firms to use the introduction of the SM&CR to consider how they deliver outcomes to consumers and which individuals within the firm are responsible for making sure these outcomes happen. This thoughtful approach to culture will be as important, in many ways, as changes to form filling and regulatory titles. 

3. Anniversary of IDD

It is now just over a year since the Insurance Distribution Directive (IDD) came into force in the UK (in October 2018). This means that for many advisers, the CPD clock for 15 hours of ongoing training on protection and protection-related subjects will be reset.

The range of topics that count as protection-related under the IDD are very wide, and include regulatory issues, knowledge of the wider financial and benefit system, and client needs. As a result, the vast majority of advisers’ ongoing training requirements will be included in the 35 hours of CPD they already do under Retail Distribution Review rules.

The main thing to remember for advisers is to keep a record of reading and other training they do to keep up with product knowledge, as this is one of the subjects that advisers are required to keep up with under the IDD.

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