RegulationDec 4 2015

FCA demands to see one in ten consolidator files

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FCA demands to see one in ten consolidator files

A number of financial advice consolidator firms have been contacted by the Financial Conduct Authority for information on suitability processes when acquiring businesses.

FTAdviser understands that the FCA has asked across all consolidators to see 10 to 12 per cent of client files in order to review their records.

The regulator requested information during autumn as part of normal supervisory work, and not in preparation for a thematic review.

An FCA spokesperson said: “As part of the FCA’s supervisory model, we will from time-to-time ask firms to give us more information on how they operate.

“We do this to get a better understanding of the firms we regulate, how the market is working and to see how consumers are being served.”

Brian Spence, managing partner at Harrison Spence, said that this is not something the FCA is significantly worried about but that at the same time, larger consolidators are buying up IFAs. He said there is a lot of press comment that there might be churning going on.

“As far as I understand it, they’ve made it a mandatory requirement of advisers to move a maximum of 20 per cent across in one year, meaning it would take five years to move assets across.

“It is the FCA dotting their i’s and cross ing their t’s just to prove they’ve done it. I don’t think it is a huge problem.”

Dawn Pearce-Herzberg, managing director at Vines Row said: “In my view, the FCA’s apparent ‘sudden’ interest in consolidators is not necessarily because they have a specific reason for concern.

“Indeed it is not a surprise that due to the sheer volume of deal activity pre and post-RDR that this area has gone onto the FCA radar. Any consolidator that has the right processes and mandated systems in place will have nothing to worry about and it’s right that a check is put in place to ensure that clients are being looked after during the process of integration.”

In March this year, Wealth Horizon chief executive Chris Williams told FTAdviser that consolidation is inevitable in the wealth management industry, and has started to gather pace in the run-up to next month’s at-retirement reforms.

He argued that new entrants to the market will continue to offer the best opportunity to “shake things up to challenge the old guard” and bring clients genuinely to the heart of propositions.