Of Relevance to:
Firms providing personal recommendations to retail customers
The FCA seems happy with the outcome of a review of suitability it undertook last year which captured 1,142 individual pieces of advice given by 656 firms.
The review looked at pension and investment personal recommendations delivered by firms to retail customers during 2015 – it did not consider how firms met the suitability rules when managing investments.
The FCA found that ‘suitable advice’ was given in 93.1% of cases reviewed. The FCA describes this as a ’positive result’ which they attribute to the RDR. In addition, 2.5% of cases were described as ‘unclear’ due to inadequate information on file – which the FCA regards as a breach of COBS 9 (‘Suitability’) as the firms responsible were unable to demonstrate that suitable advice had been given.
The exercise also looked at disclosures (relating to firms’ charges and services, product information and suitability reports) although the findings were less positive with only 52.9% of cases being deemed ‘acceptable’ in respect of all three areas.
We are advised that there will be a communication programme rolled out over 2017/18 which will share further details of these findings including examples of good and poor practice. We are also warned that there will be a repeat of the review in 2019 which will “measure how the sector has responded to our findings and communications plan”. This review will not only look at suitability of advice and compliance with the disclosure rules, but also compliance with any new relevant rules, including those under MiFID II, PRIIPs and IDD.