FCA Positive Compliance Seminar 2014

Hello Everyone.

PPOL have recently attended the FCA’s Positive Compliance Seminar in Edinburgh, their first for 2014, and would like to share our thoughts.

Disclosure & Charges

We will start with a very important area raised around disclosure, our understanding of what was said was as long as disclosure in areas of adviser charging, and adviser status for example were 'relevant' and 'clear' with written confirmation of any restrictions, they were not that concerned if costs of advice were fair or proportionate, so whatever firms wanted to charge was for them to decide and then agree and disclose with cash examples and not for the FCA to get involved with. For ongoing advice, it was made clear however that the service being offered should be disclosed in detail and that it should always be caveated that these costs can fluctuate based on the value of the funds being serviced and that the service is not compulsory and can be cancelled at any time.

Individual Suitability

In terms of 'replacement business' (particularly in relation to centralised investment propositions (CIP) they impressed that there must be scope within a CIP for 'individual suitability' so that although the proposition itself may be standardised, it should still be flexible enough to meet this requirement. Individual suitability would mean the adviser considering:

• Client objectives are being met!
• Checking the ongoing suitability of the legacy assets before moving them across to the CIP (i.e. do they really need to be moved, if so, say so, and why and don't worry if it is meeting the client objectives even if costs are higher)
• Investment term, (make sure a 5 year objective is not met with a 10 year targeted model portfolio)
• Particular investment circumstances (does the CIP replicate / deliver the risk and taxation tolerances the client is prepared to bear. If so suitability will naturally follow)
• Particular investment preferences (green / ethical requests )
• Simplicity of needs (If the client’s needs are relatively simple can the CIP cope i.e. single managed fund, or just a few panel funds)
• Charging structure (Is the costs of the new CIP higher or lower as comparison is mandatory of 'relevant' costs. If higher, this is fine as it doesn't make it unsuitable advice, as long it is compared and good justifiable reasons are given to overcome the increased costs)

Our Investment Proposition Recommendation section should meet the FCA’s expectations for CIPs if personalised in the sections advised by our Hints & Tips. If you have not used this section as yet and would like some advice please do not hesitate to call or alternatively watch the video in our support section advising where the section should be included when creating a suitability report:

Investment Proposition Demo Video

The main issues raised regarding Suitability Reports, was that they wanted to increase the likelihood of clients reading and engaging with the suitability report contents which meant as follows:

• Personalise them and use the notes gathered from fact finds. (On that note, they said include information detailed in the fact finds current circumstances and objectives)
• Keep them clear, short, structured complete with comparison tables if replacement products and include appendices
• No waffle on about providers i.e established in 1894 by a bunch of monks.... just current relevant facts is all that is needed (PPOL will review the wording and delete the company facts as suggested).
• Discount other relevant products, but no need to discount irrelevant products if they have asked you to focus advice on a specific area.

Death Benefits - They said they would prefer to see this within the body of the report. PPOL will be updating the wizard to cover this point raised. The FCA did say it didn't need to be an in depth paragraph, but just to record what has happened.

On the whole we at PPOL believe the suitability reports being created satisfy what is expected, but as always we are currently introducing new features that will allow you to specifically include analysis where replacement business is being undertaken.

Please do not hesitate to suggest improvements as it is you who will dictate the future of PPOL.

And finally a big thank you from all of us at PPOL for your continued support.