Financial Conduct Authority  

FCA grills advisers on income loss amid pandemic

FCA grills advisers on income loss amid pandemic

The Financial Conduct Authority has asked advisers for their "best estimate" as to how long they will remain in business if they have been negatively affected by the coronavirus crisis. 

In a mandatory survey sent to 13,000 regulated firms this week the City watchdog also asked advisers to detail their income for the last financial year and an estimate of how much net income they expect to lose, if any, as a result of the knock-on effects of the pandemic. 

The probe comes as the FCA takes stock of the advice industry's "financial wellbeing" in light of the current environment and how well it might be prepared for any "lumpy" regulatory bills further down the line. 

The five page survey, seen by FTAdviser, asked advisers for their predicted cash needs and cash inflows over the next three months and whether their firm had negotiated any extensions or delayed payments with creditors during the crisis. 

Advisers were also asked for their net profit or loss in the three months to the end of February this year and the three months to the end of May, alongside an estimate of how long their business expects to remain solvent should they find themselves in trouble.

The FCA said: "We would like to understand if you may be forced to exit the market due to the current macro environment.

"We recognised that there is a lot of uncertainty in answering this question. It should be your best estimate of the feasibility to continue to operate your business in the current circumstances."  

The regulator also asked if firms had furloughed employees or claimed or received support during the coronavirus crisis from a government-backed scheme. 

Earlier this year the watchdog promised "flexibility" to regulated firms which may struggle financially during the coronavirus pandemic.

But in a Dear CEO letter in April the FCA clarified government loans granted to firms in a bid to tackle the coronavirus fallout cannot be used to meet capital adequacy requirements.

Speaking at a virtual conference hosted by the Personal Investment Management & Financial Advice Association last week, Megan Butler, executive director of supervision at the FCA, said the regulator had already seen a significant downward pressure on many firms' revenues asa a result of coronavirus. 

Ms Butler warned it could not be ignored that the crisis could force some firms to exit from the market altogether.

Advisers have seven days to respond to the survey.

rachel.mortimer@ft.com 

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