January was a red-letter month for the financial advisory and wealth management worlds, with three ‘Dear CEO’ letters from the Financial Conduct Authority and regulatory bills hitting the doormats.
The FCA’s Dear CEO letter to asset managers warned that poor product assessment and conflicts of interest mean they are not consistently delivering good value to retail investors.
The missive stated the fund management sector needed to “progress” to protect and grow its customers’ capital effectively.
The City watchdog also sounded the alarm on alternative investments, warning investment firms it would test them on the suitability of their products.
These warnings followed the letter to advisers, which flagged a number of concerns including the perennial question of advice suitability.
While the industry was taking all this in, the regulators were also holding their hands out to take money from the industry.
Last month, FTAdviser reported on the Financial Services Compensation Scheme levy increase, with advisers expected to pay £213m towards the FSCS levy for the coming year, almost 13 per cent more than in the previous year.
Advisers were soon blasting the lifeboat scheme for putting adverts on Twitter encouraging people to submit claims, calling it “irresponsible”.
Last week, we detailed the scale of some of the bills being demanded - as well as the non-negotiable timescale - with some advisers citing total levies of six figures.
The FSCS defended the levy hike by citing rising regulatory involvement in pension cases, such as unsuitable Sipp investments and defined benefit transfers. DB transfers were also another focus of the FCA’s Dear CEO letter to advisers.
A few days later, a freedom of information request to the regulator by consultancy Buck revealed that almost 80 per cent of advisers in the defined benefit market had been warned last year about their transfer advice last year as the FCA continued its crackdown.
In October Debbie Gupta, director of financial advice at the FCA, said the watchdog had written to more than half of the 2,500 advice firms in the defined benefit market expressing concerns about “potential harm”.
Buck’s FOI request showed that the total number of firms to which the FCA had written was 1,841. Businesses were given two months to ensure the possible flaws which the watchdog identified were resolved.
Therefore it was with perhaps more than a little sense of schadenfreude that advisers read how the FCA had been ordered to pay a £2,000 fine by The Pensions Regulator over a lack of details in its defined contribution scheme documentation.
This was the highest penalty the pensions watchdog can give to a pension scheme for failing to comply with the so-called chair’s statement.
The chair’s statement is the document in which the DC scheme trustees explain the actions they have taken to comply with certain obligations.