The Financial Conduct Authority (FCA) has told New Model Adviser® it will be focusing its attention on improving good practice at small IFAs, as it published the results of its suitability review.
Yesterday the FCA reported back on its review which looked at 1,142 individual pieces of advice from 656 firms and in positive news for the sector found suitable advice was given 93% of the time.
The review did however find levels of unsuitable advice and issues around disclosure were more apparent at independent firms compared to network members – firms in networks provided acceptable fee disclosure in 69% of cases and those directly authorised provided it in 46% of cases.
Speaking with New Model Adviser®, the FCA’s director of life insurance and financial advice, Linda Woodall, said the FCA’s attention would be on smaller IFAs and around how it can improve practices there.
‘I think we will certainly want to do more with smaller firms who have fewer compliance resources than the larger ones,’ Woodall said.
‘We will have to do more to communicate directly our expectations on what good looks like. So that is the area of focus for us – it is about engagement, communication and tailoring messages in terms of content and also delivery to meet the needs of smaller firms who typically don’t have large compliance teams.'
Woodall (pictured) stressed the regulator does recognise the compliance limitations of these firms and will continue to do so.
‘We have to recognise [their smaller compliance teams] and we do [recognise that],’ she said.
Woodall added the work for the smaller firms would not be through any specific FCA action but would be through engagement and communication.
On the whole Woodall was upbeat about the outcomes of the suitability review and said it showed a standard for the sector to look back on.
‘For the first time we have a benchmark about the profession and what it is doing in terms of delivering suitable advice,’ she said. ‘We are very pleased with the suitability results and given it is a bit over 93% [suitable] that says if you are a consumer and if you either engage or are looking to engage with a financial adviser you can have a high level of confidence you will get suitable advice.’
She added the positive results of the suitability review are testament to success of the retail distribution review (RDR) and how advice firms have responded to that reform.
‘I would say that firms have risen to the challenges of RDR and because the regulator sets the framework and the rules and the industry makes that happen – together we have made a difference following the introduction of RDR.’