An FCA Crackdown on Advisers is in the pipeline, as it becomes apparent that numbers of firms abusing consumers is on the rise, the FT Adviser writes.
The authority published a letter to financial advisers dated the 21st of January, 2020, stating that cases where “significant harm to consumers’ financial well-being” were on the rise.
Four different ways of financial advisers causing harm to clients were addressed as follows:
- Unsuitable advice
- Pension and investment scams
- Clients not receiving redress from the Ombudsman or firms being unable to pay out compensation
- Excessive fees for products and services
The financial adviser market preventing harm to the client is a priority going forward will be a point of increased focus, the FCA stipulated. Further work would be undertaken on suitability of advice and disclosure, with a focus on initial and ongoing advice provided to consumers.
The letter stated:
“You need to ensure the advice you provide is suitable, costs and charges are disclosed clearly, and you act in the best interests of your clients. Conflicts of interest must be identified and where they cannot be prevented, disclosed and managed.”
Defined benefit transfer advice was previously found to have only 50% of its advice to be deemed suitable. Inadequate fact-finding would create a high risk to clients, resulting in unsuitable advice. Advisers have therefore been urged to collate all necessary information and use the correct resources for advisory, transfer, specialist and compliance to transfer client pensions.
Adequate financial resources and professional indemnity insurance were also of concern to the regulating body:
“We are concerned some financial advisers are holding inadequate financial resources and/or PI insurance for the business activities they carry out.
“[This] increases the risk of firms being unable to put things right where they have caused harm to their clients.
“The inability to compensate consumers, and the transfer of these costs to other market participants via the FSCS levy, is unfair and places an unnecessary burden on other firms.”
The FCA went on to reiterate that valid PI insurance be held for business both past and current, ensuring that no breaks on cover occur. It must not be subject to conditions limiting its cover, with permissible exclusions requiring additional funds in hand to bridge the deficit.
Regarding scams in the pension and investment markets, the FCA pointed out that firms must be aware of the current risks of scams, and offer systems and solutions capable of avoiding them.
In a closing note, the FCA finished with:
“We expect you to consider and discuss this letter with your fellow directors and board and agree what, if any, further action you should take. We also expect principal firms to share the contents of the letter with their appointed representatives.”
Further reading
Investment Mis-selling Guide – Oakwood Solicitors Ltd
WHAT TO DO NEXT
For any legal advice on how best to progress with an investment or whether you may have a claim, contact our Financial Litigation team on 0113 200 9787 for a free initial consultation.
Article by Stuart Jones
An FCA Crackdown on Advisers is in the pipeline, as it becomes apparent that numbers of firms abusing consumers is on the rise, the FT Adviser writes. The authority published a letter to financial advisers dated the 21st of January, 2020, stating that cases where “significant harm to consumers’ financial well-being” were on the…
View
The 35-Hour Working Week
At present, a large number of employees across the United Kingdom are essentially overworked, and underpaid. It is also becoming more apparent that working families are struggling to keep up with …
View
Why Would I Need Legal Representation for a Criminal Injuries Compensation Claim?
It’s a simple question and one that justifies an answer. A victim looking to pursue a criminal injury claim may wonder exactly why they would need to pay for legal assista…
View
