FCA makes advice suitability key priority in business plan

By Justin Cash

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Apr 25, 2019

The FCA has placed the suitability of advice as a key priority in its business plan released today.

While the regulator notes that its overall suitability review in 2017 found that investment, pension accumulation and retirement income advice was suitable in 93 per cent of cases, two areas remain where consumers are significantly more likely to be harmed: defined benefit pension transfer advice and advice on high-risk investment.

The FCA says these will “continue to be a priority” when it comes to the regulator’s supervision of the sector.

The regulator adds it will be “exploring how we can use more effective data analysis to identify emerging issues and outlier firms at an earlier stage”.

Chief executive Andrew Bailey writes: “A relatively recent group of the potentially vulnerable are those newly able to access their defined contribution pensions, who may be especially susceptible to unscrupulous or ill-advised investments. As well as our campaigns to raise awareness among this group, we will prioritise our supervision of both defined benefit to defined contribution transfer advice and advice on high-risk investments.”

Wealth managers and the use of discretionary mandates come in for particular criticism when it comes to scam investments.

The FCA says it has seen “evidence of an increase in wealth managers’ discretionary portfolios being used for pension scams, and poor conduct from wealth managers who make unsuitable investments in high risk assets for their clients. Our activities will improve our ability to prevent or reduce harm in this area.”

The regulator confirms in the business plan that it will be re-running its suitability review this year, with a view to publishing the results next year. It will also conduct a review of what impact the RDR and Financial Advice Market Review has has on the advice profession.

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