The FCA’s Nick Hulme has said the regulator will continue to pursue bad actors and work collaboratively with advice firms as it looks to publish a policy statement on its 'polluter pays' proposals before the end of the year.
Speaking at the Consumer Duty Alliance’s financial planning conference today (October 11), Nick Hulme, head of department, advisers, wealth and pensions at the FCA, said the regulator and advice firms had the same goals so he wanted to work more collaboratively across a number of its initiatives - including the advice guidance boundary, the polluter pays model and retirement income and ongoing advice.
Hulme said good advice firms were paying for other firm failures, with significant liabilities falling on the FSCS levy each year.
Therefore the FCA will publish a policy statement later this year on its capital deduction for redress proposals.
In November 2023, the regulator announced a consultation which set out that personal investment firms would need to set aside capital so they could cover compensation costs for bad advice.
The proposals aimed to ensure that the polluter pays for the redress costs they generate.
Hulme said the FCA wants to make sure firms and their appointed representatives which created liabilities were better able to pay them, so there would be more capital to go into FSCS recovery should a firm fail.
He said: “A key point we heard in the feedback was the importance of a robust supervisory approach for non-compliance and therefore, if implemented, this would also be accompanied by a very robust data-led supervisory approach with ring-fenced staff.
“We would be looking or working with those firms who apply to the asset retention in the new framework to help them work through the payment of their redress liabilities in a viable way.
“Crucially, it will be continuously monitoring to identify and assertively hold to account any firm that seeks to avoid the new framework, either through phoenixing or trying to exit the market.”
Retirement income and ongoing advice
When looking at retirement income advice, Hulme said this part of the market was “critical” and showed where “advisers can add huge value”.
He said the best practice document released by the regulator earlier this year looked at examples to work on in relation to factoring in the individual circumstances when advising the client.
But he pointed out there could be a lack of target market consideration and said there must be evidence of method or assumption when providing that advice, particularly around risk.
“We are now carrying out further supervisory work with a number of firms and we will, where necessary, take action,” Hulme said.
“But crucially, we will also commit to share further best practice in due course from the reviews that we're currently doing, the same is true for ongoing advice.”
Hulme said the FCA was concerned some clients were being charged for services that were not delivered which he said “was not right”.
He pointed out that 90 per cent of new clients were placed into ongoing advice arrangements.
