Consumer duty
The Financial Conduct Authority (FCA) continues to stress that firms achieve better outcomes for clients with cross cutting rules covering acting in good faith, avoiding foreseeable harm and supporting clients in achieving their financial objectives. Firms are expected to continue the process of applying these rules across the products and services they offer, the prices charged, the way in which they communicate with clients, and support them through the life of the product or service. Challenging times.
Distance working
Following the COVID-19 pandemic many businesses adopted a mixed approach with staff working at least some of the time from home. This can present challenges for firms looking to ensure that compliance requirements continue to be met and that staff are appropriately supervised.
Due diligence
The FCA remains interested in how firms are identifying providers and solutions which they recommend to their clients. The concern is that some will just take what providers tell them at face value rather than probing to 'see what's under the bonnet'. A good starting point is to identify what your clients want and then use that to ask challenging questions.
Crowdfunding
Entrepreneurs are increasingly seeking alternative financing and crowdfunding; equity or loans have a potential role in helping them to build their business. It’s critical to have clarity on the risks involved when security is required by investors. FCA authorisation is required for many organisations looking to operate as a platform in this sector and getting it right is not as easy as it may seem at first.
The sector is subject to occasional reviews during which the FCA considers how to strengthen the assessment and disclosure of risk or improve the marketing of these sites.
Claims management
The FCA is the regulator of claims management companies (CMCs). There were many firms in this sector who chose to cease trading rather than take on the new standards and rules. The survivors have had the opportunity to become trusted providers of high quality, good value services that help customers pursue legitimate claims for redress. Not all of them have succeeded in reaching the appropriate standards of conduct.
Planning for retirement
The advent of flexibility in pensions caused some significant shifts in approach for providers and advisers. For the FCA, the key remains ensuring that consumers are given advice which is both accurate and comprehensible. One crucial area we’ve found firms still need to consider is how they demonstrate that options are considered appropriately and kept under review, particularly during times of interest rate volatility.
Incentives
The FCA remains concerned about the scope for incentives to distort behaviour. We are seeing more questions during the application process around conflicts of interest than previously. Firms should be looking again at what incentives they have in place and considering whether rewards motivate behaviour that is in the clients’ best interests.
Senior Managers
All FCA regulated firms are expected to be able to demonstrate accountability across senior management, as well as their engagement in business monitoring. Refresher training, e.g. on the conduct rules forms part of this, as well as the proper discussion of relevant management information. There is still scope for improvement in certification processes.
Creditworthiness in the consumer credit industry
The FCA continues to monitor firms within the consumer credit industry and one of their concerns remains the way in which creditworthiness is assessed. Good firms will regularly review their policies and processes in order to make any necessary changes. For example, can staff clearly distinguish between credit risk and affordability risk in carrying out a creditworthiness / affordability assessment?
To find out more, contact us by phone on +447890 311975, email info@compliancecubed.co.uk or use the below form.