4 min read 15 May 23
On that serious note, I’ve done some sifting to highlight what advisers need to know from the Plan - including an important point about the Consumer Duty and technology - as well as wider issues that none of us can afford to ignore, either as advisers or consumers.
At first glance, there might not be a huge amount in the Plan that impacts advisers directly. But it’s worth considering the regulatory context because there are some big things happening in the real world that carry serious implications –the cost-of-living crisis, other post-covid economic fallout and the war in Ukraine are very much still ongoing.
Right up front FCA chief executive officer, Nikhil Rathi, acknowledges that the economic and geopolitical environment is likely to remain ‘highly uncertain’ over the coming year.
There are some references to Silicon Valley Bank (SVB), which imploded shortly before the plan was published, and there is an expectation that we could see more firm failures in the future. So it’s not sugar-coating the situation for anyone.
What’s most interesting about this year’s plan is that the FCA, taking into account all that’s going on, has raised the priority of four ‘critical commitments’:
Of the four commitments this is by far the most relevant for advisers and their clients. And, if you couldn’t already guess by the title, it’s principally about the Consumer Duty. There’s a particularly telling phrase in the Plan that the FCA is bolstering its resources to ensure it’s ‘embedded effectively within firms and central to their technology’.
Advice firms and providers alike had better be sure their systems have been tested with a Consumer Duty lens in mind. And that any changes firms are thinking of making have the consumer front and centre in their plans. The regulator is also allocating extra staff to deal with firms as they work with consumers struggling with the cost-of-living crisis.
Although the other three critical commitments are less directly relevant for advisers, nonetheless it's still unusual to see the Plan include such a clear and concise focus, so it’s worth outlining these:
This is all about the post-Brexit regulatory environment. Given the sheer volume of EU level rules in the Handbook, it’s a mammoth task to review and replace them with rules which work as well, or better, for the UK, and to give the regulators appropriate powers.
There’s also all the rest of the Future Regulatory Framework Review to implement, such as setting up a new statutory panel to examine the cost benefit analysis of the FCA’s work – a key point for the industry which pays the bills for regulation.
A look at the recruitment page on the FCA’s website shows the number of vacancies for data, market intelligence and cyber security roles. This is an area where many financial services organisations need to focus and the FCA is no exception. They are clearly keen to get up to speed, particularly given the emphasis on prioritising consumers in vulnerable circumstances who may be more susceptible to fraud.
This is about upgrading technology and data capabilities given the increase in market risk globally and also about reducing firm burden further by implementing more improvements to data collections.
The role of the regulators themselves is currently a hot topic too. The FCA and the Prudential Regulation Authority (PRA) are due to get an objective of ‘facilitating the international competitiveness of the UK economy and its growth’. This is a sensitive subject – there are those who are worried that ‘international competitiveness’ is another form of words for ‘bonfire of regulations’.
The FCA is quick to point out that ‘international competitiveness’ is a secondary objective - in other words, it will still be focusing first on its primary objectives. Protecting consumers, especially by implementing the consumer duty, will still be prioritised first, along with protecting the integrity of the UK financial system and promoting competition, before international competitiveness is considered.
Taking all of this into account, the four commitments and the focus on its primary objectives give us the clearest indication we’ve seen yet in any FCA business plan of exactly where the regulator thinks the problems lie and where it will be adding more resources accordingly. But what it definitely does provide is an important reality check about what’s likely to be a challenging environment for everyone this year.
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