Financial Conduct Authority  

FCA to send third financial resilience survey to advisers

FCA to send third financial resilience survey to advisers

The Financial Conduct Authority is to send a third mandatory survey to advisers this week probing the industry's financial resilience in the face of the ongoing coronavirus crisis. 

Firms are expected to receive the regulator's data request between January 13 and 19 and will have 15 working days to respond. 

The survey is expected to include ten questions in total probing a firm's liquidity and cash availability, recent financial performance, scale of business activity and any access to government schemes. 

It is the third request of its kind sent to firms in the financial services industry since the pandemic began, with the FCA previously asking advisers for data in June and September of last year. 

The regulator said the data requests allowed it to understand any change in firms’ financial positions over time and it expected to repeat the survey again in the future. 

Support business Threesixty Services estimated the survey would take no longer than an hour to complete. 

Previous communications from the FCA of this nature have been known to trigger cause for concern, with some advisers reporting in September to be unsure whether the email was a scam as a result of the unfamiliar email address used to send it. 

The picture so far 

Last week the FCA published its most detailed financial snapshot of the market since the pandemic began, with a warning 4,000 firms in the financial services sector were at "heightened risk" of failing as a result of the crisis. 

Within the retail investment market, which includes advisers, self-invested personal pension operators and platforms, 3,414 firms predicted the crisis would have a negative impact on income. 

The advice sector had one of the highest proportion of firms expecting a drop in income, equating to 66 per cent of the 5,159 firms which responded to the FCA's data request.

But the impact on income was largely predicted to be minimal, with 2,973 of the firms in the retail investment market which predicted a drop estimating the reduction would sit between 1 and 25 per cent and only 26 firms saying income might plummet by more than 76 per cent. 

But there was light at the end of the tunnel for advisers. 

The FCA probed the 23,000 firms across the sector on how profitability had fared throughout the crisis, with the results hinting at a positive outlook for retail investment firms. 

In February, before the coronavirus pandemic hit, 76 per cent of firms in the financial services industry recorded a profit and 22 per cent of firms were unprofitable. This had changed slightly by the summer, when 74 per cent of firms recorded a profit and 24 per cent found themselves unprofitable.

But the advice sector bucked this trend, with the number of businesses making a profit actually increasing throughout the year. 

Of those in the retail investment sector which responded to the FCA in June, 4,473 firms were profitable - up from 4,416 firms in February.

And likewise, the number of businesses making a loss in this sector dropped from 683 to 621 in the same period.