Regulation in 2019: Have advisers got the all-clear?

  • Learn about the regulatory challenges facing advisers
  • Be able to describe which areas the FCA is focusing on
  • Understand the new Mifid II changes

“Time spent by adviser administrators and paraplanners on gathering and analysing data for this Mifid II reporting is time taken away from client servicing.”

Requirements may not end there. FCA chief executive Andrew Bailey told MPs earlier this month that the regulator’s Mifid II priorities would shift this year from costs and charges to ensuring that advisers are recommending the right kind of products for their clients. The watchdog has also been keen to ensure that intermediaries’ segmentation practices are up to scratch.

Another big 2018 story that will continue to play out this year is inevitably that concerning pension transfers. The FCA has completed its market-wide data request on defined benefit transfers and is now reviewing responses, meaning a further announcement is imminent. But its decision to back away from the idea of a ban on contingent charging suggests the regulator is unlikely to introduce a major overhaul of practices – despite the recent efforts of the Work and Pensions committee.

SMCR roll-out

Both pension transfers and Mifid II practices remain urgent issues that must be addressed sooner rather than later. But time is still on advisers’ side when it comes to the one major piece of regulation being implemented in 2019. The Senior Managers and Certification Regime will be extended on December 9 2019, but even then will only be implemented gradually.

The regime, which has applied to banks since 2016, is now being rolled out to almost every regulated firm. Its aim is to force managers to take greater responsibility for their businesses. The FCA will not approve more junior staff, instead passing this responsibility on to firms.

Jonathan Davidson, director of supervision and authorisations at the regulator, explains the rationale for the regime: “You are a leader as well as a decision maker, and if something is going wrong in your area we are going to be asking some very difficult questions.

“[Under the certification regime] firms cannot just turn around and say ‘the FCA approved this person’ if the adviser turns out to be a bad apple.”

Mr Percival says the SMCR is another step on the journey towards a more qualified profession, which the regulator began with the RDR in 2013.

He adds: “There are a lot of adviser firms at the smaller end of the scale who are still quite ad hoc in the way they run their business. They are still very advice-focused, rather than being a business that provides advice; there is a subtle but important difference there.”

Adviser tiers

In order to roll out the regime to advisers, the FCA has divided the sector into three tiers: core, enhanced and limited.

While enhanced firms are those deemed particularly large – such as companies that hold in excess of £50bn in assets under management – a significant proportion of advice firms, particularly the likes of sole traders, are likely to find themselves in the limited bracket. But due to a legal loophole, the SMCR does not currently apply to appointed representatives.


Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. How does Mr Percival describe the coming 12 months in terms of regulation?

  2. What does Mr Cornwall suggest still needs to be bedded down?

  3. Mr Bamford says: "I have a fairly low degree of confidence in their ability to get [Mifid II] right in a timely fashion." Who is referring to?

  4. According to Ms Bradley, what could be make advisers' Mifid II duties "quite easy"?

  5. What does Ms Bradley expect the FCA's RDR review to focus on?

  6. Mr Percival says many smaller advice firms operate in what way?

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You have successfully answered all the questions correctly, well done!

You should now know…

  • Learn about the regulatory challenges facing advisers
  • Be able to describe which areas the FCA is focusing on
  • Understand the new Mifid II changes

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