FCA speaks on financial advice

Megan Butler has spoken on assessing the value of financial advice.  She spoke of the growing importance of financial advice as increasing numbers of people need help making “sense” of their choices.  Recent FCA studies have shown that, in 2015, 93.1% of advice on investments, pension accumulation and retirement outcomes was suitable. This figure was pleasing, but does raise the issue of how to deal with the small pockets of underperformance.

She spoke of FCA’s role in focussing on where areas of bad advice are worse than the benchmark results, and prioritising areas where there is the potential for large detriment to many customers. Currently, the focus is on DB-DC transfer advice, and high-risk investments.

Common issues FCA has found when looking at pension transfer advice are:

  • failure to get enough information about client needs and circumstances
  • failing to consider the needs of the client alongside the objectives
  • making inadequate assessments of the risks clients were willing and able to take.

The root cause, FCA found, was often due to poor business models that lost sight of client needs.

On high-risk investments, FCA has identified, and warned the industry about, the risks of working with unregulated introducers. It is also focusing on the risks that SIPP operators face from new pension scams and frauds.

Finally, she spoke of MiFID 2, and particularly its product governance, and costs and disclosure requirements., and on the asset management market study, as FCA prepares a consultation on transparency-related points.