Investments  

Upcoming rules that could change advice landscape

  • Explain key changes in regulation
  • Explain key changes in budget
  • Identify future consultations
CPD
Approx.30min
Upcoming rules that could change advice landscape

With the news agenda very much dictated by Covid-19 it is easy to forget about the other things on the horizon which may shift the landscape of financial advice. 

While it is not the immediate concern there are some changes to be aware of. 

Making platform transfers easier

On 31 July the FCA’s Policy statement PS19/29 changes aimed at making it easier for consumers to transfer fund investments between platforms takes effect.  

The new rules set out in Cobs 6.1H (platform switching) are unchanged from the consultation paper and will apply to all firms falling within the platform service provider definition.

This is any firm offering a combined execution only dealing and custody service in relation to retail investment products. 

It will require platforms to:

  • Offer consumers the choice to transfer units in investment funds that are common to both platforms via an in-specie transfer.
  • Request a conversion of unit classes, where this is necessary to enable an in-specie transfer to take place.
  • Ensure that consumers moving onto a new platform are given an option to convert to discounted units, where these are available for them to invest in.

CP19/12 also contained high level proposals for a possible ban or cap on exit fees which would extend beyond platforms to capture a broad range of firms undertaking dealing and arranging. 

These proposals will be covered in the further consultation paper we expect to be published later on in Q2 2020, with feedback from the FCA in Q4 2020. 

These changes should be beneficial for advisers in ensuring that, subject to individual suitability assessments, clients are on the most appropriate platform for their needs.

EU Withdrawal (Brexit)

While Brexit has now happened, or at least the “divorce agreement” part of it, we are however still subject to EU rules and will be implementing those that come in before the end of the transition period at the end of December 2020.  

While it is likely that the FCA will maintain close working relationships with the EU and other regulatory bodies, the scope for divergence will depend to a large extent on the deal eventually struck with the EU. 

In the meantime, firms will need to ensure they are prepared for a range of scenarios. 

This may include the prospect that particular activities firms currently conduct, may not fall within the final agreements, between the UK and the EU.

However, before we finally leave, ESMA (the European Securities and Markets Authority) is due to publish a further consultation paper relating to Mifid II in the Spring. 

The paper is likely to have a requirement, which the FCA will then have to implement, to collect information on a client’s ESG (environmental, social, and governance) preferences.  

The regulatory obligation that will arise may not be prescriptive, but rather based on “good practice” principles but this will be something that will cause both advisers and providers to have to think quite deeply about.  

For example, how are the inevitable trade-offs within ESG going to be managed? 

How will advisers have meaningful conversations with clients about their preferences? 

What information are advisers going to need from providers to inform their recommendations? 

CPD
Approx.30min

Questions appear on the last page of this article.