Dr Matthew Connell offers a regulatory update including a look towards the Autumn Statement and guidance from the FCA
New Government, New Focus
Our last regulatory update began with a new government – and this edition is no different. However, what has seemingly changed is that Rishi Sunak’s government is taking a much tougher stance towards the ‘enemy’ of inflation that the Truss government, with Sunak saying ‘It makes everyone poor… It erodes savings and that is why it will be a priority of our government to grip and reduce inflation, and provide support to those who need it as we do.”
At the time of writing, the government is warning that its Autumn Statement will include significant tax rises, a level of uncertainty that will certainly boost the need for professional financial advice.
FCA at the Festival of Financial Planning
The Financial Conduct Authority’s (FCA) Therese Chambers addressed the PFS Festival of Financial Planning in November, recognising the benefits that comes from greater investment, saying: “We… support more people investing and it is promising to see an increase in consumer investments accounts, with British adults holding any investment, excluding investment properties, rising from 29% to 37% in the last five years.”
She also discussed areas where lighter-touch regulation could be more appropriate, saying: “We recognise that in some areas, where investments are relatively simple and customers’ needs are simple too, existing regulation can be burdensome. We want to allow for more flexibility for firms offering simpler forms of advice and more flexibility in how customers can pay fees.”
She signalled that effective regulation is on the side of well-run firms as well as consumers, stating: “The fact is… that many firms are still falling below the standards we expect. That is demonstrated by high Financial Services Compensation Scheme costs, which are rightly a source of frustration for those firms doing the right thing.”
Finally, she talked about the need for cultural change, saying: “For many firms, the new [Consumer] Duty will require a cultural change. Cultural change cannot be achieved simply by adjustments in governance, management information and processes. Firms which view the new Consumer Duty as simply a change to governance and processes are doomed to fail from the start.”
Defined Benefit Redress Calculations
The FCA has warned firms about redress calculations for DB Pensions. It said:
“We have recently received information about a small number of firms not including all fees and charges in their defined benefit pension advice redress calculations, in line with current guidance FG17/9.
“The information suggests these firms are not considering ongoing fund costs and/or fully allowing for ongoing adviser charges in redress calculations. Some of these firms may also be unfairly terminating consumer contracts after consumers make a complaint.
“We are looking into these matters and where we identify firms not calculating redress correctly, we will take action using the full range of our powers which may include appointing an independent professional to check calculations and help consumers get the right redress.”
The full guidance is at: www.fca.org.uk/news/statements/defined-benefit-pension-redress-calculations
Dr Matthew Connell is director of policy and public affairs of the CII