FCA promises to go ‘harder and faster’ in reforming financial sector
The Financial Conduct Authority (FCA) has promised to go “harder and faster” in overhauling the financial sector amid government pressure to shake up a variety of regulatory burdens on firms.
The watchdog has pledged to “take another look” at the rules around ongoing advice after wealth managers were forced to set aside hundreds of millions to pay back customers last year.
St James’s Place, the hardest hit firm, was forced to set aside £426m to fund dealing with a deluge of complaints from clients that they had not received the ongoing services they had paid for.
“We acknowledge the rules around ongoing advice were written well over a decade ago,” said Nick Hulme, the FCA’s head of advisers, wealth, and pensions, announcing that “clarity” on the new regime would be announced in the summer.
Speaking at the Morningstar Investment Conference, Hulme faced criticism that the FCA had been acting as a “price regulator” with its consumer duty regime.
The regulation, which forces financial firms to “put their customers’ needs first” and provide ‘fair value’ for their clients, has been controversial, with some accusing it of failing to improve outcomes for investors and pushing firms to charge too little.
In January, business secretary Jonathan Reynolds made it clear that cutting consumer duty was one of the key targets of the government’s deregulation plan.
“I’m not going to rise to [the accusation],” said Hulme in response to the question accusing the FCA of price setting, arguing that the regulator was simply asking for “reasonableness” in how clients were charged.
“Would you be happy if your close family member received a service in your firm?” asked Hulme. “Is that reasonable based on the price, and what is offered?”
Another significant piece of regulation set to be overhauled by the FCA is over the boundary between financial advice and guidance, with the watchdog pledging to allow firms to offer targeted guidance to investors without subscribing to the strict rules surrounding formal financial advice.
“Only around eight per cent of people take financial advice each year, we want to close that gap and find ways into that 92 per cent,” said Hulme.
The review is aimed at creating “stepping stones” to “holistic full fat advice”, so retail investors are “stepping on something rather than nothing,” he added.
The regulator is set to publish a consultation on targeted support in both pensions and retail investments next month, which will also include an update on the advice guidance boundary, said Hulme.