Financial Conduct Authority  

FCA justifies data demands on advisers

FCA justifies data demands on advisers

The Financial Conduct Authority has revealed why it recently demanded 250 advice firms deliver data on unregulated investment recommendations made.

Megan Butler, executive director of supervision for the investment wholesale and specialists division at the Financial Conduct Authority (FCA), apologised for the time and cost on advice firms of ad hoc data requests from the regulator.

But Ms Butler said the FCA did not make these data requests “lightly”, arguing that by collecting this information the regulator could swiftly pinpoint rogue pockets of bad advice in the industry and therefore reduce the burden on the industry of firms falling on the Financial Services Compensation Scheme.

While recent studies have shown the vast majority of advice is suitable, Ms Butler said the regulator needed to act on poor recommendations to ditch a defined benefit scheme and intermediaries pushing unregulated investments.

Back in October the FCA revealed advice in more than half of the defined benefit pension (DB) transfers where the recommendation was to move the retirement pot was unsuitable or unclear.

From a total of 88 DB transfers analysed by the watchdog since October 2015, only 47 per cent were suitable, the FCA announced.

The regulator found that 17 per cent were unsuitable and in the remaining 36 per cent suitability was unclear.

Ms Butler said to tackle this problem the FCA was employing increasingly sophisticated algorithm models to identify higher risk advice businesses to reduce the volume or breadth of the data requests the watchdog has to make.

But she said it was vital the regulator still continued to demand data from advisers in areas where it has immediate concerns as to ask consumers for information just revealed what damage had already been done.

Ms Butler said: “Data analysis is a key means of managing those remaining poor pockets of advice.

“It is essential that any [pension transfer] advice given is centred on meeting best interest of the client. The percentages cited suggest this isn’t happening consistently enough in this area.”

Speaking at the Personal Investment Management & Financial Advice Association (Pimfa) annual summit, Ms Butler said she also wanted more advisers to come forward at whistleblowers.

Advisers gathered at The Grange Hotel in London today (8 November) were told the FCA supported Pimfa’s plans to create a portal that allowed members to flag areas of concern advisers have about rival businesses.

She said: “Please report all activity that is causing you concern to our supervisors. Every piece of intelligence is reviewed even if we can’t tell you how it was used.

“Please report poor professional practice where you see it. A healthy reporting culture is integral to stopping things from going wrong.

“I want to offer assurance we record all information you give us securely and sanitise it so sources aren’t identifiable.”