The City watchdog has today announced its goals for the foreseeable future, outlining the areas it was most concerned about and some targets for its regulatory approach.
The 26-page business plan, published this morning (April 7), was somewhat dominated by the spreading coronavirus crisis but the Financial Conduct Authority also raised concerns over pensions advice and investment products.
Here are eight things advisers should know about
1 Retirement in the spotlight
The FCA has retirement advice on its radar and said there was a “significant risk of harm” in the pensions market, driven partly by pension transfers and pension freedoms.
Specifically, the watchdog noted the “investment distribution process and support network around it” was not working effectively.
It has outlined three targets for better retirement advice: investment products are appropriate for consumer needs; consumers make effective decisions about their investments; and firms operate under high regulatory standards and act in consumers’ interest.
To help tackle this, the FCA is proposing a consumer harm campaign to help consumers make better-informed investment decisions.
It plans to run this over five years to the tune of £2.3m, which will be allocated proportionately across all fee-blocks in the 2020/21 year.
In terms of measuring its progress on this topic, the FCA confirmed once again it would continue to assess the suitability of defined benefit pension transfer advice and rekindle its probe into decumulation advice, which was paused due to the virus.
Its evaluations of the Retail Distribution Review and the Financial Advice Market Review are still ongoing and the FCA said it would continue to assess developments in the “financial support market” through these investigations.
2 It’s all about value
The City watchdog continues to focus on products and services being good value for money for the consumer, and pledged today to develop a way of assessing whether firms were offering their clients “fair value”.
It had already raised concerns over 'good value' in mortgages, consumer credit, the advice and asset management markets but the new work, which will take place over the next three years, will use measurements and metrics to assess fair value for consumers.
Targets in this remit include products meeting consumer needs at a suitable quality and price, innovation and competition supporting greater value for consumers, and ensuring vulnerable customers are not exploited or targeted with poor value products.
It said: “Fair value for consumers is key to healthy competition and underpins consumer trust in financial services…[and] firms should use data and algorithms ethically to price their products.”
3 Regulation revamp
In the business plan, the FCA also admitted the focus of regulators had too often been on processes rather than good consumer outcomes, and that this had trickled down to what firms prioritised.
The FCA said: “The current framework is too focused on rules and process, and not enough on principles and outcomes.
"We see far too many resources devoted to redress and remediation, and not enough to empower consumers to take good decisions and regulatory action to prevent harm and safeguarding consumers’ financial wellbeing."