The long-awaited FCA Thematic Review (TR24/1) on Retirement Income Advice has finally landed (on 20th March). FCA’s findings make awful reading.
click here
The file check results were – 67% suitable / 22% unclear / 11% unsuitable. When one third of IFA files are failing to hit suitable mark the only surprise is that there is no mention of enforcement. What is going on?
The FCA reviewed 100 files from 24 firms. Just 45 of those with the information available were rated suitable. You would ordinarily expect a demand for a public enquiry with these results after 36 years of regulation. FCA explain their findings
MI LACKING IN ALL AREAS
“Some firms even found it difficult to provide the requested information for the data survey. Some firms did not centrally record information, and used manual extraction from individual files to provide the data. Some firms had difficulty providing fully completed advice registers.”
Firms’ own QA checks frequently failed to identify missing information, or that there were potential issues with the suitability of advice given. The FCA found inaccuracies in two thirds of the files requested for one firm, despite the files having been checked under the firm’s QA process. For example, they received accumulation advice files instead of retirement income files, advice that had not proceeded or had not been presented yet, files that had not been QA checked (but were recorded as having been checked) and files for annuity advice that had been recorded as drawdown (and vice versa).
DATA ANALYTICS ON STEROIDS
FCA cannot perform lots of on-site visits right now, but they are requesting lots of data and for firms that do not produce correct MI, you’re for it.
AI is changing the way the FCA regulate. Firms may also note that the FCA new digital hub in Leeds has just recruited over 75 data scientists. “We plan to invest more into these technologies to proactively monitor markets, including for market surveillance purposes.” (source ) That is analytics on steroids.
Anyone who’s attended an FCA Live and Local event will be able to tell you that they keep hammering home the message that firms need meaningful MI and that they need to act upon what this tells them.
“Inaccurate or inadequate management information were found in 13 of the 24 advice registers submitted. In several instances, the registers were so inaccurate that the advice scenario for files they received did not match what was recorded.” (source, TR24/1)
How will you cope when this FCA email hits the SMF16’s inbox, with 10 days to respond?
And if there is one thing from this paper that BAT Software can solve, it is data. BAT Software has the boxes to complete, just type or upload the data. Unlike other systems, it is built from the top down – designed to manage a practice, with CRM built on top of those foundations.
THE RIGHT TOOL FOR THE RIGHT JOB
FCA criticisms were specially reserved for those who claim their own internal QA checks are sufficient. BAT Software is currently working on an AI tools to assist the file checkers – subject to rigorous back testing and data training with our existing compliance firms. But while AI file checker will be a “nice to have” tool, this FCA paper also shows that it is rapidly becoming essential.