Kris Armstrong, Policy Manager, Simplybiz

There is noise that the regulatory landscape is undergoing a transformation, with the FCA promising to become a more efficient, effective, and proportionate regulator. Following discussions with the Government, the FCA has now set out a new five-year strategy which will involve both consumer protection and regulating for growth. This long-term strategy will take time to deliver.

For insight into the more immediate future, we can turn to the Portfolio Strategy Letter issued on October 7th 2024, which sets the agenda for the upcoming two years; both what is expected of firms and what supervisory activity the FCA will be carrying out. Most of the focus areas remain consistent with those of the past 18 months. Consumer Duty and outcomes-based regulation is central to the FCA’ s strategy, with the potential benefit that it may well reduce the complexity, but the drawback that it may increase uncertainty. We responded to the FCA call for input on streamlining the FCA handbook late last year, and we will monitor for further developments.

Firms should demonstrate compliance with Consumer Duty on an ongoing basis; the second annual assessment of Consumer Duty Outcomes and Board Report( also referred to as a Governing Body Report) is due for completion by 31 July 2025. There should be demonstrable actions with commentary of progress against action points from the previous year.

In addition to Consumer Duty, there are other focus areas identified within the Portfolio Strategy Letter. On Retirement Income Advice, the FCA will follow-up on the findings from the thematic review, intending to publish additional commentary in the first quarter of 2025. The letter reminds firms that they should be able to evidence the review they have undertaken in response to the publication and changes made accordingly. To enhance consistency of advice, we recommend aligning advice standards with those published by the FCA in its Retirement Income Advice

Assessment Tool. This publication has been useful; we have updated our file review standards, and our Advice Quality Team have reviewed their processes accordingly. We would suggest that all advisers have a sample of their files checked against the standards set out by FCA, with the output feeding into your ongoing Consumer Duty monitoring and helping to identify areas for improvement.

The provision of ongoing advice continues to be an important area of focus for firms with an update expected from the FCA on work it has done with the 20 largest advice firms. We continue to recommend that firms focus on the design, the delivery, and the data around the provision of ongoing services to clients. Firms must not impose adviser charges on clients for services that aren’ t provided. Furthermore, firms must maintain comprehensive records to facilitate appropriate monitoring and to demonstrate their commitment to delivering good outcomes for clients. We have previously set out how firms can self-assess their ongoing service proposition.

The FCA focus on“ polluter pays” has been welcomed by firms, signifying a proactive stance towards rectifying past mistakes by requiring firms to set aside prudent capital provisions for potential and actual redress liabilities. With the emphasis on growth, we will see how final rules on capital adequacy reform for personal investment firms look when announced.

The landscape on sustainability disclosure requirements is evolving, with new regulation now in force aimed at improving trust enhancing transparency from the top down. To support advisers, we issued our SDR Guide a few months ago. We are expecting focus on this area to grow over the course of the year, with feedback expected from an industry-let Adviser’ Sustainability Steering Working Group, extension of the regime for portfolio management and further developments expected to support advisers in their research of this market.

16 | The Adviser