If last year was anything to go by, 2020 is set to have a lot of change in store for the industry and the country alike.
When there are tumultuous times on the horizon, it helps to be prepared in whatever way possible. So here are the top risks advice firms could encounter this year.
DB pensions transfers suitability
Last year ended with the regulator sending out letters to 1,700 firms it identified as needing to take action over the suitability of their DB pension transfer advice.
If you’re one of the firms targeted by the review you need to respond to the FCA to explain what you’re doing to make sure the transfers you’ve recommended are fully suitable for your clients. You’ll also need to provide evidence of this to the regulator, plus evidence of how you’ve addressed any issues with suitability.
All firms with permissions, regardless of whether you’ve received one of the FCA’s letters, should check they can evidence the steps that have gone into making sure transfer advice is suitable.
If you’re thinking of selling your firm this year, pension transfers should be at the top of your list of priorities. In our experience the selling firm’s history of DB pensions transfer advice, uncovered during the regulatory due diligence phase, is the number one reason that acquisitions fail.
Before you start acquisition activity, we can independently review a sample of your company’s pension transfer advice. A clean bill of health will make an excellent selling point to acquiring firms, while getting issues flagged early will give you time to rectify them. Get in touch with us to find out how we can help.
Embedding SMCR and tackling culture
The deadline for extending SMCR to solo-regulated firms may have passed, but that milestone marks more of a beginning than an end. You should already be confident that you’ve fully implemented SMCR, but now comes the continued work of embedding the regime into your culture as business as usual.
Don’t fall into the trap of thinking the pressure is off. The ongoing focus of the regime will be the fitness and propriety of senior managers and extending the conduct rules to everyone but ancillary staff by December 2020. That’s a significant undertaking, so work should already be underway to get this sorted.
The regulator has made it clear it considers SMCR and culture to be closely connected. Jonathan Davidson, FCA Executive Director of Supervision – Retail and Authorisation, called SMCR ‘a catalyst for driving cultural transformation’. To get the regime fully integrated into your company you should take the opportunity to review your culture too.
Tackle SMCR in 2020 with a culture and conduct risk assessment from TCC. It’ll find areas you need to address and help you make sure the regime is fully embedded and supported by your corporate culture.
The widening advice gap
Originally scheduled for last year, the FCA’s findings from the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR) are now billed to be published later this year. The regulator is likely to intervene once it forms a view on where improvements can be made.
You should expect action from the FCA that will help widen access to financial advice and guidance for simpler products.
While it’s unclear what action the regulator will take exactly, expect to see the spotlight fall on charging models and business strategies. For its part, we predict that the FCA will concentrate effort on consumer education campaigns.
It’s likely that the changes proposed by the regulator will impact how you conduct business, which could end up being costly if you’re caught off-guard. Stay competitive by keeping these potential changes in mind, paying particular attention to opportunities for innovation in your approach, as well as chances to explore how best to provide your ongoing service to your clients.
Don’t miss out on advances in tech
As firms work to service the advice gap you can expect to see increased uptake in tech tools in 2020. While developments in technologies available to advisers present plenty of opportunity for innovation, bear in mind that those who don’t keep up will be at a significant competitive disadvantage.
Start off the new year with an intelligent assessment of both the tools available and the areas of your business that could be enhanced by tech. Consider the data you hold and the value that presents if the insights are unlocked effectively.
Every day new RegTech solutions are developed. Not only can they cut the cost of compliance, but also help you secure better outcomes for your clients.