Shayne Halfpenny-Ray examines the post-Brexit regulatory landscape for financial advisers
The UK has officially left the European Union (EU), but what that means for financial services remains opaque at best. Services were barely touched on in the Trade and Cooperation Agreement (TCA), so now the priority will be for the UK and the EU to agree to a new relationship that goes beyond what the TCA set out.
The government is set to work on a memorandum of understanding (MoU) with the EU in March. It is hoped that this MoU will provide the framework for future regulatory cooperation.
At the PFS, we have been engaging with the profession’s bodies through the Insurance & Financial Services All-Party Parliamentary Group on post-Brexit priorities. Equivalence, resolving the need for green cards and the current consultations on the Future Regulatory Framework (FRF) review and Solvency II are the issues most discussed by the market.
Equivalence for Solvency II – and other areas if possible – remains a key concern, but it is important to point out that Solvency II has no equivalence regime that facilitates market access for direct insurance.
HM Treasury’s review of both the FRF for financial services and Solvency II are opportune. As we look ahead to how financial services are regulated post-Brexit, it is important to balance the concerns of UK businesses that work with the EU and attract inward investment, with how we want to shape the UK internal market for the next generation.
The Solvency II review offers a once-in-a-generation chance of ensuring prudential regulation works for the
UK market. The opportunity lies in considering how much more appropriate the requirements on capital, reporting and the overall approach to risk management could be made to better fit the future insurance market. However, this must also balance the need to protect policyholders and the safety and soundness of firms, with the desire to create a more competitive market that can further promote long-term investment of capital by firms. One area being advocated is a more streamlined approach to reporting, which would be of help to smaller firms, but also a boon for everyone.
Firms around the country have spent vast sums complying with Solvency II and will not want to tear up the rulebook and start again. So, reform allowing insurers to better deploy capital to new emerging markets, and supporting the government’s desire for a green technology boom, could come without the cost associated of a complete overhaul. It would certainly make cross-border work with the EU a less fractious relationship for the market.
A lot of what is expected of advisers is already apparent and we have produced reams of guidance to support members. But perhaps we can look to the Covid-19 guidance of the last year for a better sense of what more the regulator will be expecting from firms.
During the pandemic, the Financial Conduct Authority has stressed the need to consider the situation people are in now more than ever and be proactive in engaging with customers. Proactivity has been something charities and consumer groups have wanted the profession to deploy often – they could encourage this permanently.
National Disability Strategy
The National Disability Strategy is expected in March and will give employers guidance on what the government expects of them when employing disabled workers, as well as how to improve access to careers, products and services.
Already, the government has established a network of ministerial ambassadors to reach out to businesses and discuss how they are improving access to jobs and services in their sector.
The PFS will continue to work with external stakeholders, the government and regulators on these matters and will keep members informed of all changes as matters progress.
Shayne Halfpenny-Ray is policy and public affairs adviser of the PFS