Getting your facts straight is at the core of good compliance, yet with the abundance of content out there it can be hard to make sense of what’s real and what’s not. We see it as our duty to use our FCA and industry knowledge to connect our clients and the wider industry to the truth. After all, we’ll all do better for our clients and customers as a result.  

During our interactions with clients we are asked many of the same questions. In this blog, David Boyhan debunks the four most common myths we’ve helped firms overcome over the past two months.

 

1. Culture is not a priority at the moment

Supervision of culture has been on the regulatory agenda for over ten years now.  And, in the current economic environment culture is actually more important than ever. Businesses that have a positive, healthy culture are more likely to provide fair outcomes for their clients, who are more likely to reciprocate by rewarding the business with loyalty and positive reviews/referrals.

The FCA’s latest business plan has reiterated its focus on culture. It called out a firm’s purpose, leadership, governance and approach to managing and rewarding staff as key cultural indicators. This has not changed in the current crisis.

Read more about maintaining a healthy culture during the crisis

 

2. Operational resilience is not a conduct issue

We’ve heard many people question whether operational resilience is a conduct issue. It most definitely is.

The initial discussion paper authored by the FCA, BoE and PRA talked about operations and financial systems – perhaps not terms usually associated with conduct. However, where there are failures in operations this can lead to customer harm, so operational resilience definitely forms part of the conduct agenda for firms.

If change management goes wrong, customers can suffer significant harm, for example not being able to access their bank accounts.  If a firm is subject to a cyber-attack, customer data could be compromised leading to additional harm.

The Covid19 pandemic will have taught you a lot about your operational resilience. Learn from this experience and enhance your operational resilience going forward.  It’ll benefit both your business and your customers.

Read more about effective operational resilience.

 

3. Are DB Transfers Allowed?

There’s been some confusion about whether firms are allowed to provide advice on DB Transfers in the current market conditions. The simple answer is yes.

The Pensions Regulator has given trustees the opportunity to decline requests for Cash Equivalent Transfer Values (CETV) at the moment. This is because schemes may want to revisit their CETV terms and to ensure that all members, including those who are remaining in the scheme, are treated fairly.

However, where a CETV is provided then advice can be given to clients. Due to the current economic uncertainty advice is even more challenging than usual. You’ll need to be sure that client risk profiles, including attitude to transfer risk, are current at the time of advice.

The FCA has provided information on which risk warnings have increased in significance in the current economic climate and questions that can be asked to enhance understanding of the client’s position. So DB Transfers are still allowed, but even more care than usual is required.

Read David’s latest advice on DB transfers. 

 

4. Are DB Transfers part of the FCA’s Assessing Suitability Review 2?

First it is important to recognise that the FCA has postponed, rather than cancelled, this important review. But when this review restarts, DB Transfers will not form part of the review.

The Assessing Suitability Review will focus on retirement income advice. Specifically, where a personal recommendation is made in relation to withdrawing assets from a retirement income product. However, the FCA has made it clear that advice that is provided alongside a recommendation to transfer out of a Defined Benefit scheme is excluded from the review.

The Assessing Suitability Review is focussed on retirement income rather than advice to accumulate funds.  This is a significant difference to the FCA’s first Assessing Suitability Review in 2017.  This change of focus is confirmed in the Portfolio Strategy Letter issued in January.

Whilst this Assessing Suitability Review had been postponed, the FCA is still continuing with its thematic work on DB Transfers.

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