Consumer Duty – the shape of things to come?

In its numerous publications prior to the implementation of Consumer Duty, the FCA promised that it would be more proactive and take a forward looking view, rather than acting with the benefit of hindsight – something for which it has received criticism previously.

We’ve been waiting to see how this would pan out and didn’t have to wait long!

One of ATEB’s firms recently received an unsolicited email from an FCA Supervisor which included a request to provide a great deal of information. We expect to see more of this as CD becomes the norm.

The firm was asked to provide the following:

  • A copy of the firm’s organogram including staff positions within the Firm
  • A copy of the firm’s new business register in relation to all business conducted over the period between 25 July 2021 – 25 July 2023. This should clearly differentiate between business submitted by the firm and any of its appointed representative(s) which should be clearly identified. Please provide this in Excel format and include the following information (as a minimum).
    1. The client’s name (initials are sufficient)
    2. The name of the adviser
    3. Details of where the business had been introduced, or referred from (e.g., name of any introducer firm) if applicable
    4. Whether the sale was conducted on an advised, execution only or insistent client basis
    5. Details of the product effected
    6. The investment amount, or premium payable (including frequency of payment)
    7. Whether the business is replacement business, a pension transfer or pension switch and the ceding scheme/source of the funds in all cases (where appropriate)
    8. Full details of the underlying investments for ‘all’ business to be documented. (This should include the full name of the investment and whether it is a standard or non-standard investment)
    9. In relation to any SIPP, SSAS or (Q)ROPS business written:
      1. the SIPP operator (or SSAS/(Q)ROP administrator) the business was submitted to
      2. confirmation of whether advice has been provided on:
        • the SIPP/SSAS/(Q)ROPS,
        • full details of the underlying investment made into the SIPP/SSAS/QROPS. This should include the full name of the investment and whether it is a standard or non-standard investment.
      3. Details of the adviser charges

Please note the register should include all transactions where advice was provided as well as ‘new’ products, e.g., when a client was advised to switch their product provider/platform and/or the underlying investment solution.

  • A copy of all introducer agreements (if applicable).
  • Please confirm whether you have a Centralised Investment Proposition. If you do, please provide the following:
    • Details of the portfolios and funds within the CIP.
    • Outline the governance arrangements in place to provide ongoing oversight of the CIP (e.g., an investment committee). Who is included in the investment committee / decision makers.
    • Dates and brief reason for the removal or addition of any fund/fund managers from the CIP in the last 12 months.
    • Minutes from the last 12 months meetings covering each fund.
  • Provide details of the compliance monitoring arrangements that are in place including:
  • Copies of all internal and external compliance/audit reports that have been produced, and actions taken in response to those reports in the last two years.
  • A copy of the firm’s complaints registers for the period 24 July 2021 – 24 July 2023.
  • A copy of senior management function (SMF) statements of responsibilities (SoR).
  • A copy of the firm’s latest PII policy and proposal form. Please explain what additional capital you are holding in relation to any exclusions imposed on your PI cover.
  • Details of the firm’s adviser charges (Initial charge and Ongoing Service charge).

And finally… An explanation of how you intend to meet our new Consumer Duty.

The firm was provided with two weeks to collate all the information and send it to the FCA and by good fortune we had performed an audit just a couple of months previously.

This approach is becoming more commonplace and isn’t unusual, so if your firm receives one of these emails could you provide everything requested?

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

Nobody can say that they weren’t warned. The regulator is definitely upping the ante and firms can expect to see more of these requests as the FCA will want evidence that Consumer Duty is being taken seriously, as well as seeking assurances that those holding Senior Management Functions are fulfilling their responsibilities. Interesting to note was the comment that: the register should include all transactions where advice was provided as well as ‘new’ products, e.g., when a client was advised to switch their product provider/platform and/or the underlying investment solution. Fortunately, the firm involved here was able to provide all the information requested within the 14 day timeframe, but where firms aren’t able to do so, this is when things can start to get messy. We also expect that the FCA will contact firms that haven’t had any regulatory interaction previously. They already know firms that attend their Live & Local events, so given the importance that they’re placing on Consumer Duty, it seems likely that they will broaden the scope of firms that they want to take a closer look at.

Action Required By You

If your firm doesn’t get an audit completed now might be a good time! Audits are there to tell you what you’re doing well, not just where there are issues. The FCA has provided plenty of hints that it will be taking a more intrusive approach, so the list of information requested from this firm is probably what most firms should aim to have available. If you have some gaps then speak with your ATEB Consultant to get some help.
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About the Author

Paul has in-depth experience across a wide spectrum, having headed up compliance, T&C, monitoring, oversight and MLRO functions previously. He was also an IFA for some time so can see things from more than one angle.

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