Regulation  

FCA cancels delayed suitability review

FCA cancels delayed suitability review

The Financial Conduct Authority has cancelled its second suitability review of retirement advice to allow it “to focus on other priority work”.

In an update today (July 16), the regulator said it decided not to continue planned work on the review so that it could instead focus on other areas such as defined benefit pension transfers and the issues raised in the 2020 consumer investments call for input.

It said: “We remain committed to ensuring firms give suitable advice, including retirement income advice, that leads to good consumer outcomes. 

“We will continue to monitor the market, and where we identify concerns will consider whether additional work is needed.”

The City-watchdog first began probing advisers on their retirement income advice records by sending a number of information requests to randomly selected advice firms at the beginning of last year. 

However, in May last year the FCA confirmed its review of the advice consumers received around retirement income had been delayed as the watchdog shed "non-critical" work in the face of the pandemic. 

The review was tentatively set to be picked up again between January and March this year, with the FCA stating the process could continue into the second quarter of 2021. 

Yet in an update published in September 2020, the regulator said the second suitability review had dropped off the FCA's regulatory timetable and faced an indefinite delay.

In today's announcement, the FCA confirmed the review was cancelled and would no longer go ahead.

SME access to Fos

In the same update, the FCA said its post-implementation review of rules extending small and medium-sized enterprises access to Financial Ombudsman Service had also been delayed.

The FCA had increased the Fos compensation limit from £150,000 to £350,000 in April 2019 as part of its move to expand the ombudsman's services to SMEs.

Today it said coronavirus had a significant effect on SMEs with the full impact remaining unknown.

“We are therefore delaying the start of the review to allow us to include upcoming developments with SME complaints within the scope of our review. We will assess this position by April 2023.

“We continue to engage with the Financial Ombudsman Service on its insights from current handling of SME complaints.”

The regulator is also no longer conducting its diagnostic review of business models, which was aimed at identifying retail lending business models which benefit from consumers not repaying their debts.

Following initial testing and data gathering from firms, the work was postponed for much of last year.

In late 2020, the regulator resumed the second stage of the work across various retail lending sectors and identified indicators of business models that may benefit from consumers not repaying debts. 

The FCA said: “The success of our analysis has meant we have embedded our methodology and findings into wider business model analysis, so that it is now integral to our oversight of relevant sectors. 

“We are therefore not undertaking further work on this theme.”