Reviews into all aspects of the post-guidance sales and advice process and on provider engagement with consumers seeking to access their pots, will be a major thrust of work in the coming year for the regulator, its business plan has revealed.
The FCA announced it will be looking into both retirement sales practices and retirement outcomes in the coming financial year, with reviews into looking at both advised purchases - reviewing the suitability of advice given - and non-advised purchases.
It will also probe how retirement sales practices of pension providers have changed, in particular “to assess how firms are supporting customers to make the right choices given the wider range of options available”.
The plan comes on the day research published by Prudential revealed concerns among advisers over advice given in light of the new rules, which close to half fear could give rise to future claims from consumers taking advantage of freedoms and who later regret their decision.
Around 45 per cent of 120 advisers polled revealed they fear the advice they give today could come back to haunt them. Around one in four said they have already taken action to ‘future proof’ their advice and head off potential problems.
On the positive side, the research found more than half of advice firms expect annual profits to increase as a result of the new pension rules, with those predicting an uplift saying they expect profits to rise by an average of 13 per cent.
Part of the increased demand for advice will be driven by the launch of Pension Wise and the guidance guarantee, with 44 per cent of advisers questioned believing it will increase enquiries to adviser firms.
The FCA said the key objective of its review work into providers would be to ensure firms have “stepped up” and improved practices since a thematic report in December, as well as to ensure they do not seek to undermine or circumvent the Pension Wise service for the purposes of retention.
Martin Wheatley, chief executive of the FCA, said: “The business plan is set against the backdrop of the most fundamental changes to pension policy we have seen in over a generation.
“Therefore we will be looking at how the market is working and in particular, how the industry is adapting to this considerable change and what it means for consumers.”
During this financial year the FCA will also look again into inducements for adviser firms to see whether its guidance in this area is being heeded, saying it will assess firms’ practices in this area to help inform a consultation on handbook changes needed to implement Mifid II.
The FCA will also undertake a market study into non-advised sales of investment and protection products, focusing on how “firms support consumers in choosing products that are suitable for their circumstances”.
As for the mortgage market, the regulator will continue its assessment of how firms are implementing our post-MMR rules, including completing the advice and distribution review in the summer and commencing a review into responsible lending from April.
Alongside these external issues, the FCA said it will also undertake work to review its own operations and looking at the value for money of areas of higher expenditure.
As part of this the FCA will review its governance and decision-making processes. The process of embedding this started last year, with the restructuring that saw two distinct divisions created within the organisation, as well as the departures of several senior staff.
The two divisions that will undertake supervisory and authorisations work will each be led by a director who will sit on the executive committee. Supervision investment, wholesale and specialists will be led by Tracey McDermott, while Linda Woodall will head up retail and authorisations.
The drive to give better value for money comes in response to calls from the National Audit Office this time last year and more recently the Association of Professional Financial Advisers, that the FCA demonstrates it is not squandering the money levied from the industry.
peter.walker@ft.com, emma.hughes@ft.com
