FCA fines highlight the need for better customer support
The FCA has written a new
The FCA has written a new Dear CEO letter to financial advice firms on 20th March 2024, asking senior leaders to review their current processes and policies surrounding retirement income advice and their control framework.
The regulator’s latest correspondence follows the release of its thematic review into retirement income advice, which was published on 20th March.
It confirmed retirement income advice will remain an ongoing focus and has also pledged to continue its supervisory work to safeguard consumers from potential harm in this sector.
The review report noted both areas of good practice and points of improvement for firms within the industry. The FCA highlighted evidence of some firms designing their advice model in a way that’s conducive to delivering good outcomes – including paying sufficient consideration to their clients’ individual needs.
It was also positive to see 67% of files reviewed by the FCA being graded as suitable.
However, the findings also raised some concerns, including some firms giving inadequate consideration of the differing needs of customer in decumulation, compared to accumulation. There were also inconsistencies in relation to the amount of Know Your Customer information being collected, with 22% of files having Material Information Gaps.
The FCA’s Executive Director of Markets and International, Sarah Pritchard, amplified the FCA’s concerns asking all firms to review their own processes:
“Financial advisers have a vital role in helping consumers to make the right decisions now to support them long into the future. Decisions for consumers approaching retirement are complex, with the potential for risk. We want to support a sector that can help consumers access pension benefits, invest with confidence and have a sustainable income when they retire.
“Some firms are getting this right and making a real difference to their customers. However, others are not even getting the basics right and putting their customers’ futures at risk. We urge all firms to take on board our findings and review their own processes. Where they do not, we will act.”
In addition to concerns surrounding advice not being sufficiently tailored to the needs of the customer, the Dear CEO letter noted a number of other pressing issues that firms will need to address as soon as possible.
These include, in the FCA’s own words:
The FCA has also unveiled a new Retirement Income Advice Assessment Tool (RIAAT) to help firms assess the quality of their advice in line with regulatory standards. The FCA also confirmed its concerns about cash flow modelling and released a paper on improving the quality of cash flow modelling.
Get in touch for an exploratory conversation about how we can help address your firm’s unique challenges and risks – including an impartial, expert support on confirming your ongoing advice services are truly providing value for clients – to ensure you’re meeting your retirement income advice obligations.