Explained: The FCA’s Portfolio Letter on expectations for financial advisers and investment intermediaries

The FCA has this week issued a portfolio letter to firms whose primary business is financial advice or investment intermediation; it provides a summary of the FCA’s priorities, its expectations of firms in this sector and the work the FCA intends to do.

Click here to read the letter in full.

Its stated priorities over the next two years are to:

• Reduce and prevent serious harm, with a focus on retirement income advice, ongoing advice services, ensuring the ‘polluter pays’, and consolidation.
• Monitor and test higher industry standards under Consumer Duty.
• Enable more consumers to pursue their financial objectives through the Advice Guidance Boundary Review.

The letter breaks down key expectations and next steps for the following.

Retirement Income Advice

In line with Consumer Duty, the FCA expect firms considered their clients’ needs and designed their advice model in a way likely to lead to good outcomes. However following the findings published on the back of their thematic review of retirement income advice, there is still work to be done for some firms in the Retirement Income Advice sector.

Ongoing Advice Service

With advice revenue from ongoing advice increasing from 60% to 80% in seven years to 2023, the FCA is expressing concern that some clients are being charged for services they do not use or need. Whilst some firms have already been contacted by the FCA, requesting more information, firms are expected to keep their records up to date and avoid placing clients into arrangements for ongoing advice where these are inappropriate for their needs and objectives.

Polluter Pays

For any firms cancelling an authorisation or registration, the FCA reminds firms to ensure any potential liabilities are met, and that adequate financial resources are held to meet potential redress liabilities. The FCA publication from December 2023 provides more information on their expectations

Consolidation

Any firms in the process of an acquisition are reminded in the letter about the expectations around notifying the FCA, the continued delivery of good outcomes, and due diligence, among other key considerations, including the FCA’s role to assess and challenge their suitability and the financial soundness of the acquisition.

Other areas of focus to be aware of are:

• Appointed Representative oversight
• Environment, Social and Governance
• Future Disclosure Regime

Key takeaways

The FCA intends to ensure its priorities are met through increased firm engagement and collaboration across the industry, and a forward-looking and data-led approach. We expect that this could result in additional contact from the regulator in order to gain insights and spot market trends.

Ensuring records are maintained and good management information is available, to demonstrate the delivery of positive outcomes is pivotal for financial advisers and investment intermediaries.

Our team of experts can assist firms across a wide range of compliance support, audit and advisory for financial advisers and investment intermediaries, as well as the wider financial services sector.

Related to this Portfolio Letter, we can assist in:

• Reviewing the quality of firms’ retirement income advice and their ongoing advice arrangements
• Reviewing firms’ Consumer Duty arrangements
• M&A Regulatory Due Diligence
• Advising firms on the implications of consolidation and on the FCA’s intentions to review this area

For enquiries, please contact us at 0207 436 0630 or via email: info@thistleinitiatives.co.uk.