The regulator has this afternoon (2 August) published a warning to advisers saying they should carry out robust due diligence of the introducers they work with, and make sure introductions are legitimately sourced.
It has moved to remind advisers that if customers are given unsuitable advice by an introducer, the authorised firm may be held responsible for this and subject to regulatory action.
The FCA said: “Many authorised firms we have visited do not have adequate input or control over the advice they are ultimately responsible for giving to customers.
“This has been particularly evident in relation to advice on switching and transfer/conversion of pension benefits.
“We have specific concerns where this advice involves movement of pension pots to unregulated, high risk, illiquid products, whether they are based in the UK or overseas.”
Among the areas of concern identified by the FCA were instances of introducers using authorised firms’ firm reference numbers in obtaining consumer policy information, meaning the information is sent direct to them as an ‘administration office’.
But the regulator said this can result in policy information being passed to people with no right to it and the authorised firm having no control over how that information is used.
The FCA has also seen some authorised firms providing a simplified or limited advice process for customers referred to them to facilitate their desired outcome, often with no direct contact with the customer themselves.
Often, the regulator said, this simplified advice process is designed by the introducer, including the creation of heavily templated pre-prepared suitability reports provided to the firm with reassurance that the process meets regulatory requirements.
| What the FCA says firms should do |
Carry out robust due diligence on the introducers you transact with. Have in place a robust vetting procedure to ensure the introductions have been sourced legitimately. Regularly review and ensure your systems and controls are adequate to demonstrate you have full and complete ownership of the advice you are providing. Only recommend products you understand fully - how it works, the risks involved and undertake adequate due diligence. Provide independent advice, as outlined earlier, to customers introduced. Don’t allow another entity – regulated or not – to use your FRN on your behalf unless you are satisfied they are doing so appropriately. Only delegate the performance of regulated activities to other authorised firms that have the required permissions or who are your appointed representatives, with appropriate monitoring. |
The FCA’s alert said: “It is essential that at all times you maintain full and complete ownership of the advisory process between yourselves and your customer, and any regulated advice you provide must meet the requirements set out in our handbook.
“We are co-ordinating our intelligence and supervisory activities on pension scams and unsuitable advice, and will take action as necessary.
“Providing a simplified or limited advice process to consumers to facilitate investment into unregulated, high risk, illiquid products, whether they are based in the UK or overseas, or delegating regulated activity to an unauthorised party will not mean that the firm can avoid liability or regulatory action for unsuitable advice.”
