The new normal for regulation

4 min read 15 Apr 21

A quick glance back at my diary for January 2020 reminds me of just how many things I was doing at the time which were so easy to take for granted. Travelling, going to the City for work, eating somewhere other than my kitchen. Like everyone, I’m counting down the days until some sort of normality can return.

The FCA is human too, and like all of us had no idea what was about to happen. Normal life for them in January 2020 meant a series of Dear CEO letters fired off in various directions which - in case you needed reminding - included one aimed at financial advisers.

Fast forward to the here and now and we’ve been waiting patiently for the arrival of the FCA’s 2021/22 business plan which usually makes an appearance in early April, although the untimely Easter holidays may mean we have to hold on just a little longer this month to confirm if and how some of the regulator’s pre-pandemic priorities will be carried over.

In the meantime, however, while we hit refresh every five minutes on the FCA website, it’s worth taking a look back at that Dear CEO letter one more time to see if we can anticipate the direction of travel.

The letter identified four ways in which consumers of financial advice may be harmed:

  • receiving unsuitable advice for their needs and objectives
  • falling victim to pension and investment scams
  • not receiving redress as a result of the non-payment of FOS awards and/or failing firms being unable to compensate consumers
  • paying excessive fees or charges for products and services

At the time they stated that “there will be increased focus on these areas as part of our wider supervision of firms over the next two years.” The pandemic has obviously caused this focus to be redirected towards more pressing matters, however as we (hopefully) start to move back towards normality it is probably fair to say none of the above issues have gone away.

In some cases, work has continued throughout the pandemic to attempt to address these issues although sadly, the problem of scams has become even more critical, and there has also been work to try to solve the FOS and FSCS funding conundrum. So it’s a pretty safe bet that these two workstreams will continue to be a priority.

What will the future hold for assessing suitability?

The future of the FCA’s work on “assessing suitability” is less clear. Back in that January letter, the FCA stated that its further review would focus specifically on initial and ongoing advice for consumers taking income in retirement. The initial stage of this work started during January and February 2020, with a number of advice firms receiving, and duly completing requests for information from the FCA.

However as things currently stands this work has been put on hold, with the resumption at a date still to be determined. We might well find out what this date is when the business plan arrives, however I just wonder if the fact that this work has been kicked into the long grass is actually an indication that – whisper it - the initial information request didn’t turn up any real areas of concern? To put it another way, if this data request had shown there were systemic problems in the advice sector, it’s hard to see the work being put on hold indefinitely.

Will it dampen positivity?

Most advisers I speak with are increasingly confident about the future. Anecdotally the first quarter of 2021 has been very busy, with lots of positive noises coming out of the sector. The imminent FCA business plan will hopefully do nothing to dampen down this positivity. There are big issues in terms of scams and FSCS funding that need to be addressed but at its core the advice sector has so far come through this pandemic looking increasingly healthy.

So stay tuned because I’ll be picking this one up again shortly when the business plan finally lands and you’ll either find me sitting smugly because all my predictions came to pass…or eating my words.