FIN. TeamFCA has published the findings of its review into the suitability of advice given by firms on pensions and investments. The review started a year ago, and assessed over 1,000 pieces of advice given by 650 firms for compliance with the COBS suitability and disclosure rules. FCA was pleased with the results on suitability, that showed suitable advice was given in 93.1% of the cases it reviewed, with unsuitable advice in 4.3%. For the small remainder, it was not clear whether the advice was suitable. Areas which caused problems were where firms did not properly consider or mitigate the limitations of their risk profiling tools and where they recommended customers should give up valuable guarantees without good reason.
Unfortunately, firms were poor at providing compliant disclosures, with only just over half the samples being acceptable. The main culprit was initial disclosure, where firms were not properly or clearly disclosing their costs. FCA will now work to share more detail on its findings, and give examples of good and poor practice. It notes that MiFID 2, the PRIIPs Regulation and the IDD will all entail changes for advice standards and disclosures. FCA will repeat its review in 2019, basing it on advice given in 2018, so it can see not only how the results have changed, but also how firms have implemented these new requirements.
FCA’s findings also note the percentage compliance between types of investment (eg investments vs pensions), large or small firms, networks vs directly authorised firms and independent vs restricted advice. There are differences in suitability compliance, but none that FCA is particularly concerned about. There are more significant differences in disclosure compliance, notably that restricted advisers were far more likely to be compliant than independent ones, and that larger firms (with over 25 advisers) were far more likely to be compliant than smaller firms. FCA will use this information to inform which firms it targets for further communications.
