FCA Business Plan 2019/2020

FCA business plan 19/20

FCA Business Plan 2019/2020

The FCA has just published it’s Business Plan for 2019/20. Anyone who is involved in running a business – as a senior manager or as a supervisor – needs to identify the future risks the firm might face and create a culture where the interests of clients are foremost in the thoughts of staff. The FCA Business Plan 2019/20  provides a useful insight on what you need to focus on.

Click here to download the FCA Business Plan 2019/20

What’s on the FCA radar?

It’s perhaps worth just asking yourself why you think that the FCA goes to the effort of publishing its business plan every year. There is a simple answer. If you are aware of what the FCA sees as a major concern, you’ll do something about it within your own firm before the FCA potentially forces you to. It is designed to give you an insight into what the FCA will be looking at so there shouldn’t be any surprises.

There’s a sense of veja vu with the FCA Business Plan 2019/20. There have been two recurring themes that have run through the last three FCA Business Plans.  These are ‘culture’ and ‘value for money’.  They are pretty prominent again in this year’s Business Plan so clearly, there is no intention that these will go away anytime soon.

The FCA ‘cross-sector priorities’

Some of the FCA priorities potentially apply to all of the 59,000 or so regulated firms. There are eight cross-sector priorities but those that will have the greatest impact on adviser firms are:

  • Firms’ culture and accountability, e.g. the role-out of SM&CR to a wider audience and remuneration arrangements. To quote the FCA: ‘We want firms to have the leadership capability to create and maintain healthy cultures. We believe that a healthy culture is good for business as well as for consumers and for markets as a whole’.
  • Financial crime, e.g. AML, raising awareness of frauds and scams.
  • Data security, resilience and outsourcing, e.g. cyber attack, due diligence on out-sourcing arrangements.
  • Technological resilience and innovation, e.g. how well is new technology improving competition and benefiting clients?
  • Treatment of existing customers, i.e. don’t treat them differently or as second class citizens, and don’t use income from them to cross-subsidise acquiring new clients.

There are also other areas that apply to a particular sector. They are also issues which the FCA sees as being deep seated, i.e. they aren’t going away anytime soon.

Sector specific risks

Here is our brief analysis of the areas that are of most interest to people in advice firms. These key issues include the following:

  • Reducing costs (advice and product charges) to offset potential future reductions in investment returns. To quote the FCA, they want firms that ‘offer products and services that are better value for money for consumers, and actively and honestly compete to keep them’.
  • Protecting the needs of vulnerable customers. There is likely to be a huge emphasis on this going forward as FCA figures suggest that most of your clients will be vulnerable at some stage of their life. How do you define vulnerable clients – particularly those with temporary vulnerability such as depression, rather than their characteristics, e.g. deaf, or those with some serious illness? What does your training, processes and oversight look like? In other words, how would you know?
  • Defined benefit pension transfers – not a huge surprise.
  • High-risk investments. The FCA hasn’t defined what these are but I guess you will be able to make an educated guess. These will continue to be a FCA priority in their supervision work. Again, there are potential implications for your firms training and oversight in this area.
  • The suitability of advice. Despite finding that 93% of advice was suitable in 2017, the FCA still has concerns over charges and how these are explained to clients. Don’t regard this as being in the ‘sorted’ file.
  • Transparency of features risks and charges (especially ongoing charges).
  • Scams in retail investments, particularly in discretionary portfolios, pension scams, and poor conduct from wealth managers who make unsuitable investments in high risk assets for their clients.

The FCA’s Retirement Outcomes Review provides some interesting data on the pensions market.  Click here for further details.

The FCA’s Financial Advice Market Review (FAMR) provides some interesting information about how the current regulatory environment could be simplified.  Click here for further details.

Read our blog on SM&CR. who it applies to and what to do to prepare for it, click here.

To quote the FCA: ‘…we have prioritised areas where we consider both that the risks of harm to consumers, market integrity or competition are greatest and where we assess our intervention will have the most impact’. (2017/18 Business Plan)

With best wishes

Ian Patterson

Marie Patterson
Ian Patterson