Financial advisers under the regulatory spotlight

The FCA has published three Dear CEO letters this week (w/c 20 January 2020); serving notice to large chunks of the UK Financial Services industry that the regulator has shortcomings in those sectors firmly in their sights. In this piece, we look at the FCA's letter to financial advisers. 

The FCA flags that they will be spending the next two years focusing supervision efforts on four specific areas of harm caused by financial advisers to consumers: 

1. unsuitable advice for consumers' needs and objectives;
2. consumers falling victim to pension and investment scams;
3. consumers not receiving compensation when firms fail; and
4. consumers paying excessive fees or charges for products and services.

The letter is clearly a product of its time. Following last year's focus on mini-bonds, financial promotions and suitability the tone of the letter makes it clear that the FCA feels some market participants are failing to meet their obligations, including not having adequate financial resources or insurance.

Financial advisers would do well to read the letter as a whole. Especially as the FCA ends the letter by saying "we expect you to consider and discuss this letter...and agree what, if any, further action(s) you should take". Coupled with the two year time-frame mentioned elsewhere in the letter, its hard to take it as anything other than a warning that the clock is ticking.