Compliance Matters: week ending 18th October 2024

As the trees acquire their autumnal hue, and the mornings become damp and darker, we are moving towards the end of the year.  It is not yet time to look all the way back to January, just the two weeks since I last compiled a summary of regulatory the activity from the FCA and that has come into my inbox.

• FCA’s expectations for financial advisers and investment intermediaries

• Growth: mission possible

• Over £570 million stolen by fraudsters in the first half of 2024

• Gold is back as an asset class

• Four in ten advisers globally worry they will not retain client's spouse or children’s assets

FCA’s expectations for financial advisers and investment intermediaries

In a Dear CEO letter dated 7th October 2024, the FCA has outlined its priorities for the next two years:

1. Reduce and prevent serious harm – with a focus on retirement income advice, ongoing advice services, ensuring the ‘polluter pays’ and consolidation.

2. Monitor and test higher industry standards under the Consumer Duty – firms are expected to evidence your firm has implemented the Duty and complies on an ongoing basis.

3. Enable more consumers to pursue their financial objectives through the Advice Guidance Boundary Review – the FCA encourages firms to actively engage with the FCA on the review and consider the opportunities it may provide to better support clients.

Much of the commentary has focused on the consolidation element of the letter.  It can be argued that any review of consolidation should consider the role that private equity is playing and the motivation of PE firms in achieving the return on their investment.

Contrary to the focus on consolidation, in a speech at a Future Strategy for Personal Finance Professionals event Nick Hume,  head of department, advisers, wealth and pensions, consumer investments, highlighted:

• The FCA continues to focus on good client outcomes, taking a less prescriptive and, through the Consumer Duty, more outcomes-based approach to regulation.  

• It wants to give firms (from sole traders right up to the networks and nationals) the flexibility to innovate in service of their clients that fits their size and client base more easily.  

• The strategy has 3 buckets – Reduce and prevent serious harm, test and monitor under the Consumer Duty and the Advice Guidance Boundary Review. 

Once again, the FCA is putting the Consumer Duty at the front and centre of its activity.  Consolidation was mentioned by it seemed to be part of the strategy and not the most important element of it.

Growth: mission possible

In a speech by Nikhil Rathi, FCA Chief Executive, delivered at the City Dinner, Mansion House, he highlighted:

• Growth is urgent but it has always been part of the FCA’s story.

• We are seeking answers about what more we can do to support capital formation, productivity gains and financial services exports.

• The secondary growth objective is liberating, and we are having a much needed, more candid conversation about our collective risk appetite.

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  We need to collaborate to deliver growth

The speech went in to discuss its own operational effectiveness, the industry’s digital infrastructure and risk appetite linked to regulatory reform.

It is no surprise that Consumer Duty was mentioned in a reference to more outcomes-based regulation.

Over £570 million stolen by fraudsters in the first half of 2024

UK Finance has published its Half-year Fraud Report for 2024.  In the first half of 2024 just over £570 million was stolen in payment fraud as criminals continue to ruthlessly target people and try to deceive them into making payments or providing enough information to enable their accounts to be accessed or controlled.

As well as the financial losses, this crime can cause severe psychological harm to victims.  The best way to protect against fraud is to prevent it from happening in the first place.  This is the focus of the financial services industry which invests huge sums of money, including deploying a wide variety of sophisticated tools, to try and detect potential fraud and intervene before it happens.  In the first half of this year over £710 million of unauthorised fraud was prevented, an increase of 13 per cent.  The full report can be accessed here.  

Gold is back as an asset class

A recent report by investment manager, Robeco, highlights that the recent spike in the price of gold to all-time highs suggests it should once again be treated as a genuine asset class and not an emotional fad.  The report suggests that it may be time to include a gold fund in your client portfolios or MPS.

Four in ten advisers globally worry they will not retain client's spouse or children’s assets

An article in International Investment suggests that 43% of advisers are concerned that they will not retain assets inherited by their clients’ spouse or children.

Of all the challenges facing advisers in growing their business, keeping current assets on the book is the most critical, with findings from the survey showing that four in ten (43%) are increasingly worried they will not retain assets from clients’ spouses or next-generation heirs.  In fact, one-third (33%) of global advisers say that they have lost significant assets through generational attrition.

Compliance Matters UK Limited can help you put a strategy in place to make your firm the ‘go to’ place for help and information in the event of the death of a client.

How can we help?

It is important that you have robust policies and procedures to ensure your firm delivers industry best practice and good consumer outcomes.  If you would like Compliance Matters UK Limited to review your compliance systems and controls, schedule a free, no-obligation consultancy call with us today. 

To learn more about how Compliance Matters UK Limited can support your firm, click here. 

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