Search for the word ‘disclosure’ in COBS and you will find 217 entries. These entries relate almost entirely to the requirements for the factual presentation of information, for example in costs and services documents, terms of business, etc. All these requirements still exist.

However, in recent months, we have seen the first signs of a change of emphasis by the FCA, as evidenced by the feedback to firms that have provided pension transfer advice. The FCA looked at several aspects for each transfer case checked, including disclosure, where the term was used to describe the quantity/quality of information provided to clients to help them reach an informed decision.

Confirmation comes from the August edition of the FCA’s Regulation round-up, which refers to the need to ‘facilitate consumer understanding’ and states:

“Throughout the coronavirus crisis consumers have been expected to make difficult financial decisions, many of which carry longer term consequences. We have been monitoring and evaluating the disclosure of firms, to understand if they are providing consumers with enough support with their decisions.” 

We believe that this could represent more than just a moving of label goalposts. The FCA is definitely increasing its focus on what clients understand when they make financial decisions.

This has long been in the rules. For example, COBS 9 contains a number of references to ‘client understanding’ and, in particular, the general requirement to assess a client’s level of knowledge and experience is explicitly related to ensuring that a client will understand the information provided in relation to a recommendation and the risks involved. 

Further support for this conclusion comes from the changes that are being made to rules around transfer advice. COBS 19.1.1.C currently states that firms must: 

“… take reasonable steps to ensure that the retail client understands how the key outcomes from the appropriate pension transfer analysis and the transfer value comparator contribute towards the personal recommendation …”

From 1 October 2020, this rule is amended to a much more robust requirement that firms must: 

“… get evidence that the client can demonstrate they understand the risks to them of proceeding with a pension transfer or conversion before finalising the recommendation, and keep a record of this evidence …”.