The FCA has released the finding of their April 2016 review into the pension and investment advice market. The regulator initiated the review as recognition of the important role the regulator plays in ensuring the sector is delivering suitable advice.
The importance of suitable advice for the financial advisory sector was emphasised as it was mentioned as one of the regulators seven priorities in the FCA 2016/17 Business plan, and the announcement that they intend to repeat the review in 2019, using advice provided during 2018.
The April 2016 Assessing Suitability Review covered 1,142 individual pieces of advice, provided by 656 firms. Each piece of advice was assessed against the suitability and disclosure rules in the Conduct of Business sourcebook.
The review found that:
- In 93.1% of cases, the sector provides suitable advice
- In 4.3% of cases, the sector provides unsuitable advice
- In 2.5% of cases, the sector provides unclear advice
These were deemed as ‘positive results for the sector’ by the FCA, who have attributed the results to the successful adoption by advisers to the Retail Distribution Review and reinforced by previous supervisory and enforcement activities.
During the course of 2017 and moving into 2018 the FCA will begin a communication programme that will provide further details around the findings of the review and offer some clear examples of both good and poor practice.
Another review is due to take place during 2019 and will be based on advice delivered in 2018. This second review will allow us to compare how the results have changed since the advice assessed from 2015. It should also provide an insight to how effectively firms have been able to implement the requirements introduced by MiFID II, PRIIPs and the IDD.
Each of these will pose significant changes and increased requirements for financial advisers.
As positive as the results of the review are in showing that the industry is meeting the rules in the Conduct of Business sourcebook, firms must ensure they continue to meet the standards. Especially with the important changes to both the advice and disclosure requirements brought about through; the Markets in Financial Instruments Directive II (MiFID II), the Packaged Retail and Insurance-based Investment Products regulation (PRIIPs) and the Insurance Distribution Directive (IDD).