FCA guidance 18 months late and still lacking in clarity

Ashley Wassall

To the Financial Conduct Authority: I hate to say I told you so, but, well, I (and others) did.

This week the regulator published the findings of its latest review into compliance with the principles of the Retail Distribution Review, which once again highlighted shortcomings among providers and advisers.

Under the regulator’s gaze this time are the ‘inducements’ it says life insurers are offering - and advisers are soliciting and accepting - in order to secure distribution.

Article continues after advert

The paper particularly singled out the commercial arrangements that underpin providers’ presence on adviser firm product panels, though it also covered all manner of non-financial benefits that could create conflicts of interest, from hospitality and gifts to IT service upgrades and training.

Once again, the regulator is attempting to close the metaphorical stable door when the nefarious equine occupant has long since bolted.

A year and a half ago I wrote on these very pages about the panel deals being struck between providers and advice firms, especially those operating under a restricted model that were intending to establish a panel of providers for each product area covered.

I wrote that if product choice through some advisers is going to be more limited “primarily because of commercial arrangements that benefit advisory businesses and not their clients”, then surely we have done little more with the RDR than take “one step forward to take another back”.

I’m not fishing for compliments or seeking to bask in the triumph of my self-proclaimed prescience. The observations I made were axiomatic: I’ll admit I was not the first, or the last, to make them, which only serves to highlight further how behind the times the FCA is on this.

The FCA has brought out this paper, which focuses on agreements that were made in the lead up to the RDR coming into effect in January, nine months into the new regime. Most firms will have signed and sealed the deals covering the initial post-RDR years, meaning that perhaps we are simply now waiting for the inevitable fines to rain down.

Beyond being ponderous, the regulator is also guilty of prevaricating. Despite the vituperative in the paper, in some areas there remains a glaring lack of clarity.

It is quite clear from the guidance that adviser firms should not accept substantial gifts or opulent hospitality from providers. Similarly it is clear that when recouping costs for event attendance, for example, you should do just that and no more.

In this day and age all of this should be common sense; those pulled up by the regulator on these grounds have displayed a worrying avarice that the regulator is right to highlight.