1. Learning & Development Regulatory Update Round 1 - 2017

2. Learning Objectives
Identify the key changes EU legislation will have on UK regulation
Understand the key concerns from the FCA’s Assessing Suitability Review
Understand how financial advice will be delivered following the Financial Advice Market Review

3. Good news

4. MiFID II – Call Recording
No requirement for non-MiFID firms to record calls
Confirmation of the call can be evidenced by file notes
FCA to feedback what information these notes must contain
Sadly not good news for everyone

5. Not Good News for all
All MiFID firms must record calls
Firms will be a MiFID firm if they passport into another EU country for collective investments
What about Brexit?
‘Firms will need to assess the impact that a changed relationship with Europe and any changes to the regulatory regime have on their business models’

6. MiFID II – Structured Deposits
At this time anyone can advise on structured deposits
It is to become designated investment business
Simple notification form will add it to your permissions
C&TT 193
The reason to do this - INDEPENDENCE

7. Assessment of
Suitability

8. Assessing Suitability
Thematic review carried out in 2016
700 firms contacted circa 1,000 files reviewed
Feedback to individual firms only
Wider feedback to be reported 2017/18?
Further thematic reviews in 2017

9. Assessing Suitability
Not reported wider than to individual firms
‘This letter is confidential and should not be disclosed to a third party in whole or in part without the FCA’s prior written consent’
Of the 28 responses we reviewed there were common themes

10. Assessing Suitability
Disclosure - Common Issues:
Use of ranges on fee charges – no specific cost
No cash examples for on-going charges
Applying a charge to all regular contributions for the initial cost of advice
Hourly rate with no indication of how long it will take
Tiered charging with incorrect or no examples

11. Assessing Suitability
Adviser charging rules – 2 stages
Firms must disclose its specific charging structure. This should include cash examples where the actual amount is not known
Disclosure of total adviser charge*
*this can be confirmed in the suitability report
‘Suitability report - It is good practice to include the monetary terms of the adviser charge in the suitability report’

12. Assessing Suitability
Disclosure in suitability report
Ensure the report is issued within the correct timescales:
For life policies - before it goes on risk
For pensions – within 14 days of conclusion
For all others – at the time of, or as soon as possible after, the transaction is effected

13. Assessing Suitability
Disclosure – Range of charges
i.e. we charge between 2% and 5% of the amount you invest through us
This does not give a specific charge
A solution would be to use our supplementary declaration

14. Assessing Suitability
Disclosure – cash examples for on-going charges
Use our client agreement
Use our service proposition & engagement
Send both of these with a file request

15. Assessing Suitability
Disclosure – open ended initial charges
‘The initial disclosure uses a charging structure that is not permitted under the RDR rules. It states there is a 3% adviser charge for each regular contribution. The regular contributions are open-ended and hence the total adviser charge cannot be determined and disclosed’

16. Assessing Suitability
Disclosure – hourly rates
Does the firm actually charge an hourly rate i.e.
…’or we can charge you an hourly rate of £XXX’
Is it relevant and if so it must give an indication of how long it will take
For multiple charging methods consider a standalone agreement for charges

17. Assessing Suitability
Disclosure – Tiered charging structures
Always give cash examples for each of the tiers
The answer could be £3,500 or £7,500
Up to £100,000 – 3%
Up to £300,000 – 2%
Over £300,000 – 1% 
What is the charge to invest £350,000?

18. Assessing Suitability
Suitability – Common issues:
No factfind on file
Reports being too long
Not personalised / use of generic text and jargon
‘Know your client - Although there are some details in a file note, a completed, structured and comprehensive fact find/KYC document would help ensure all relevant information is gathered’

19. Assessing Suitability
Suitability – concerns
A switch based solely on the use of FAD in 10 years time
Client ATR was 4/10 but stated they had no capacity for loss. Client went into equity funds!
Who is providing the advice - adviser or client?
Comparison of scheme benefits
‘The adviser has recommended a final salary to SIPP transfer but has not completed a TVAS report. The client has lost a valuable guarantee and opted out of their company scheme without good reason. A transfer should not be recommended without completing a detailed comparison of the two plans’ .
‘The adviser appears to be distancing himself from the fact that advice and a recommendation has been conducted (and a fee taken) by contradicting himself by stating no advice was given, when it clearly has’
‘Without details of the scheme benefits and the client’s specific need for flexibility, it is unclear
how the adviser could have compared the benefits’

20. SimplyBiz Support
We have a team qualified and experienced field compliance managers
They offer a suite of focused visits around this topic and others, including:
Client service reviews
Centralised Investment Propositions
Positive compliance
Individual agreed agendas

21. FAMR

22. Financial Advice Market Review
Launched in 2015
Report published 2016 containing 28 recommendations
Progress report issued April 2017
Guidance consultation published by FCA
What do we know?

23. FAMR - Recommendations
Recommendation 2 – The definition of advice
From 3rd January 2018 only a personal recommendation will be defined as regulated financial advice
Advice will be to buy, sell or hold
Important – don’t ignore any products or investments

24. FAMR - Recommendations
Recommendation 3 & 4 – Non-advised & Streamlined advice
Discussed in FCA’s guidance consultation
These link to automated services

25. FAMR - Recommendations
Recommendation 5 – T&C
Individuals now have 48 months to obtain appropriate qualifications
Recommendation 8 – Suitability reports
APFA have produced a guide to producing suitability reports

26. Recommendation 10 – the factfind process
FAMR
Recommendation 10 – the factfind process
What types of standard information are required in the factfind?
No standardised factfind to be produced
Considers the use of technology and portability

27. Recommendation 13 & 14 – Accessing pension advice
FAMR
Recommendation 11 & 12
Information within the workplace about financial support and good financial health
Recommendation 13 & 14 – Accessing pension advice
Employers & employees can each fund £500 tax efficiently towards the cost of advice

28. Review PII & FSCS funding
FAMR
Recommendation 20 –
Review PII & FSCS funding
Response made to this consultation
You can review this on the SB website

29. FCA Business Plan Pension activities/priorities
How consumers shop around for pension / retirement income
The use of ‘wake up’ packs at retirement
How do customers make choices when they do not use an adviser
Non-advised drawdown sales

30. Business Plan – Areas for Review
Platform review
Unsuitable advice on complex products
Wealth managers suitability
Feedback on automated advice

31. Further Updates
Partial pension transfers
Templates have been updated
Equity Release
Awaiting statement from FCA re. qualification and permission
Continue to consider its suitability

32. Looking Ahead MiFID II policy statement
Insurance Distribution Directive
Review of pension transfer rules
4th Money Laundering Directive

33. Learning Objectives
Identify the key changes EU legislation will have on UK regulation
Understand the key concerns from the FCA’s Assessing Suitability Review
Understand how financial advice will be delivered following the Financial Advice Market Review

34. ANY QUESTIONS?