FCA’s latest Mifid II consultation takes hardline approach.
Financial advisers will be expected to record telephone calls with clients under new rules imposed by the FCA.
In the FCA’s most recent Mifid II consultation paper, the regulator confirmed it would require the recording of “services that relate to the reception, transmission and execution of orders”.
Applicable to all Article 3 firms, including investment advisers, recordings of client calls will have to be stored for a minimum of five years once the rules come into force on 3 January 2018.
In the aftermath of the announcement, advisers expressed concerns over the costs that the rule may bring to smaller firms, with many fearing that it will defeat the objective of protecting advisers and clients alike.
Dean Mullaly, managing director of Mark Dean Wealth Management, said: “I don’t think it will necessarily be about the headache or the intrusion on secrecy where client-adviser relationships are concerned, but it will come down more to cost than anything else.
“Smaller firms are probably more concerned [about the changes], and not necessarily because they’ve got anything to hide.”
Aware of the widespread reservations, the FCA has since said it is “open to receiving and exploring suggestions on alternative proposals for smaller financial advisers”, provided they produce an “analogous outcome” to recording.
The Europe-wide rules come in the wake of the Fos and FCA’s most recent release of complaints data which demonstrates that mis-selling and other issues arising during transactions are still major concerns in the financial services industry.
Alan Solomons, director of Alpha Investments and Financial Planning, doesn’t believe that the cost of recording calls will be as dire as many are suggesting.
Mr Solomons said: “I do not understand what all the noise is about. Apps are available to record calls on mobile phones, with costs ranging from nil to about £6 as a one-off payment.
“On my Voip phone I have the facility to record calls as well – the extra cost is negligible.
“The hassle is remembering to file them on the computer in relation to the client, [which is] certainly worth doing as it protects you from a professional indemnity claim.”
However, Simon Webster, managing director of Facts and Figures Financial Planners, suggested that call recording for advisers who keep records in writing would be “a complete waste of time and money”.
Mr Webster continued: “It is highly disappointing that the FCA would consider gold-plating an EU directive when we are on the verge of Brexit in any event.”
Although the consultation addresses Article 3 firms, it also revealed plans to extend taping rules to all “firms carrying out non-Mifid collective portfolio management activities”. It also proposes to “extend the rules to corporate finance business”.
The move could see a reduction in sales-related complaints regarding other services and products, including payment protection insurance, which saw just shy of 1 million complaints opened under the FCA between January and June this year.
kuba.shandbaptiste@ft.com
