Our CEO & Founder James Hogbin gives his take on the recently published FCA Business Plan for 2020-2021. Read on to find out his thoughts on it all, and how it may affect your firm….
The FCA has defined five key priorities for the next one to three years.
The 1st priority is a, probably an external Strategy Consultant driven programme about Transforming the way we do business, efficiency, big data, integration, blah blah blah. At least the consultants can show they persuaded the Regulator to regurgitate their favourite buzz words.
That out of the way the next 4 are actually about what they are going to do. If we ignore the first, consultant driven, item the real No1 priority is
“Enabling effective consumer investment decisions”.
From their narrative it is clear that the FCA are unhappy about the direction taken by Government in terms of Defined Contribution Pensions and the 2015 pension freedoms legislation.
Consequently the regulator will be looking at the appropriateness of products being sold in terms of; are the products themselves useful, has the design been customer driven or vendor supplied, and is there a match between the product and who it is being sold to This develops on the Retail Distribution Review of 2012.
Clearly the spotlight is on the Retail Sales market. Interestingly in the introduction of the plan it states that FCA intend to focus on smaller firms this year.
In summary that’s IFA’s and Wealth Managers slap bang in the regulator’s crosshairs. In fact they clearly state..
“Our view is the investment distribution process, and the support network around it, is not working well enough for consumers to make effective decisions about their investments…”
which is a fairly damming criticism of the Retail Finance industry. They go on to say…
“We want to ensure firms have higher standards of governance, a stronger grip over networks of individuals in their distribution chains”
What then should a wealth manager or IFA do to fortify their regulatory position?
Obviously putting the Customer first in terms of Products offered and ensuring that the customer has a real requirement for the products being sold as well as a portfolio that is appropriate. This means strengthening the Customer appropriateness procedures & systems and ensuring that the Sales, Para Planner and Marketing staff are fully trained and aware of the regulators focus.
Aside the regulatory requirements, Firms brands are built on the fact that their staff do the right thing as in all financial transactions there is a large element of Trust.
However, as the Russian proverb has it Доверяй, но проверяй, (translated as Trust, but verify). Firms should ensure that they can verify that their staff are actually doing the right thing. In a multichannel regulated world this is quite a task. If a client wants to discuss the finer points of their Portfolio over WhatsApp or a Zoom Call then that’s what a Sales person will try to do. Meaning that the Compliance department of a firm will have to capture and supervise communications taking place in a wide variety of venues. No longer just email but Teams, Slack, Zoom, LinkedIn, Facebook and others.
To detect employee misbehaviour or uncompetitive practices a Compliance department may have to follow a single conversational thread across email, phones, WhatsApp and Zoom.
To gather evidence on mis-selling and inappropriate sales tactics given the Compliance Department will need to analyse the amount and pattern of inbound and outbound communications.
That’s on top of the day to day obligations of Record Keeping and the dreaded SYSC10A call recording regulation that requires all electronic messages are archived and supervised or Blocked.
At Fingerprint Supervision, we have spent a lot of time capturing and analysing communications data of all sorts. We have developed several techniques to systematically risk rank all communications with regards to Mis Selling, Market Manipulation, Employee Misconduct and General Regulatory Supervision (Gifts & Entertainment, PA dealing etc etc). We have worked with many different Compliance departments to develop a smooth workflow to take an identified risk and mark it as a False Positive or to build a case around it for further action.
Fingerprint Supervision is helping over 65 firms to enhance their Supervision and Monitoring to meet the Regulators expectations.
Being the top of the regulatory agenda is always uncomfortable so please give one of our Regulatory Experts a call today to see how you can improve your compliance processes in the eyes of the FCA today.
Speak Soon,
