Assessing vulnerability: How can firms help mitigate risks of DIY SIPPs?
Earlier this month, the FCA published a
In the letter, the regulator confirms CEOs are accountable for ensuring FCA requirements and expectations are fully adhered to. It continues that it expects wealth management leadership teams to invest “significant time and energy” to manage and mitigate against the levels of exposure and risk because of the importance this sector has for so many consumers.
Findings from the FCA’s recent data survey show that there have been 20 Skilled Person reports for the Consumer Investment sector in the past 18 months. A recent Freedom of Information request also identified that the wealth management sector has already paid £3.8m in fines this year. It’s clear to see why the regulator has this sector firmly in its sights – and the importance it places on the wealth management firms acting to deliver good customer outcomes.
CEOs at wealth management firms need to read and understand the FCA letter, focusing on two main priorities:
Three of the Consumer Duty’s four outcomes – price and value, products and services and consumer understanding – are spotlighted within this latest communication, with the regulator explaining the expectations in these areas. When combined with the Consumer Duty Policy statement, Finalised Guidance and previous sector letters, the FCA is unwilling to accept any more excuses from wealth management firms about why they have fallen short of the outlined expectations.
In addition, the letter also covers other areas, including non-financial misconduct, ESG, DEI and Operational Resilience. Each area is crucial, and so it’s important CEOs fully consider all the points that have been detailed.
After considering the letter and its related documents, CEOs and leadership teams should be taking stock of their business’s performance and how it would be prepared for an unannounced or short notice visit from the FCA. This includes what Management Information a firm would use to demonstrate that it’s meeting the FCA’s requirements and expectations.
Four root causes are noted in the Dear CEO letter as to why firms are falling short of the regulator’s expectations – which include governance and systems and controls. CEOs should consider what gives them confidence that their firm’s governance, systems and controls are meeting FCA requirements and what evidence they would provide to demonstrate this.
The FCA business plan confirms the regulator is investing £5.3m to ensure the Consumer Duty is embedded effectively. This significant investment demonstrates the importance the regulator is placing on the Consumer Duty – and that it will not be afraid to swiftly intervene where necessary.
Within the letter, it was also confirmed that CEOs and their leadership team need to ensure significant time, resource and, where necessary, capital are invested so they meet the outlined obligations. Seeking external support can be a diligent step for wealth management firms to take to ensure adherence to the FCA’s expectations.
TCC regulatory experts provide impartial advice to wealth management firms and work with such businesses to deliver their regulatory obligations.
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