Dear CEO letter outlines strategy for financial advisers

The FCA has published a portfolio letter which sets out its supervisory strategy for financial advisers and intermediaries. The letter confirms that financial advisers are a key priority for the FCA and outlines the risks that their activities are likely to pose:

  • Suitable advice – firms should consider the potential causes of unsuitable advice and should be ensuring they appropriately manage or avoid the risks. The FCA expects firms that have provided advice to former BSPS members to comply with the consumer redress scheme in a timely and efficient manner, providing redress to consumers who have suffered harm.
  • Pension and investment scams – firms should conduct robust due diligence on investments they recommend and should be particularly cautious where investments contain non-standard assets, illiquid investments or complex structures or where a third party may be receiving high remuneration for promoting such investments. The FCA will continue its work to identify scams via whistleblowing and data-led internal intelligence, and will take prompt and assertive action where needed.
  • Firm failure and phoenixing – where firms fail and accountable individuals seek to phoenix to another firm, the FCA will seriously question their fitness and propriety to hold another role that requires FCA approval. Applications received for individuals or phoenixed firms will be subject to significant additional scrutiny and challenge and applicants should expect to have to justify their actions and explain how they treated customers fairly.
  • Ongoing services – the FCA will monitor the implementation of the Consumer Duty across all firms. The FCA expects firms to foster healthy cultures which prevent harm to consumers and markets and to ensure that consumers are receiving appropriate communications regarding their investments.

The FCA will issue a separate letter in the coming months to further explain the impact of the Consumer Duty on financial advisers, together with examples of how the outcomes will apply to firms in practice.

Lucy Hadrill