The technical specialist at the FCA said the regulator was concerned that compliance officers and consultants are putting in processes “for the sake of it” that go beyond what is necessary to generate the right outcomes for customers.
He then suggested that over-compliance had been a factor in pushing up the costs of advice for consumers post-RDR, adding that consumers should inform the FCA is they see evidence of this.
Speaking at the Distribution Technology Annual Conference in London last week, Mr Percival said: “There is a tendency in some areas of the industry for over-compliance - that means going beyond the scope of what we require firms to do. It’s an area that has cropped up a number of times for us and it is becoming a bit of a concern.
“Do compliance officers and compliance consultants put processes in place that go beyond what we require, go beyond what is necessary to generate the right incomes for customers?
“We are really interested in making sure customers reveal if there are such processes. We sometimes feel that some processes are there for the sake of a process, and not contributing to giving the client a good deal. Some of the higher costs seen by the industry have been generated by over-compliance.”
When asked at the panel event about “reassurances” that may be granted to IFAs trying to come up with non-advised solutions to meet the advice gap, Mr Percival said he recognised “confusion” in the market surrounding existing rules about the different between advice on investments and personal recommendations.
He said a consultation paper on the matter would be published “shortly” following an “extensive” information gathering process.
Chris Hannant, the director general of the Association of Professional Financial Advisers, said: “Firms want to be on the right side of the rules but the challenge occurs when there is ambiguity. There won’t be 100 per cent alignment between what the FCA has in mind and how advisers understand the rules, so there is a potential gap between the understanding and expectations of both parties.
“Financial services firm must be confident about the framework in which they operate to minimise that gap, and what we need now need is stability and a better cross-industry following a period of big change.”
