From a crackdown on advisers selling risky exotic investments, to a whole lot more rules on everything from platforms to passives, here is your run down of what advisers need to be prepared for from the regulator this year.
It is a fairly hefty 62 pages, so here are the highlights for advisers.
High-risk and complex investments
The FCA describes high-risk investments as unusual, speculative or complex product structures, investment strategies or terms and features. As consumers look for better returns, some are buying products which are unlikely to meet their savings or investment needs.
In 2018/19 the FCA will carry out a programme of work to tackle incidences of consumers entering into high-risk investments which are unsuitable for their needs to identify problems.
It will also strengthen its authorisations gateway and supervision for firms that provide advice on high-risk and complex investments. This will ensure they improve their disclosure and reduce the risks of harm to retail investors.
Investment platforms market study
Assets administered by investment platforms continue to grow at a significant rate - currently direct-to-consumer (D2C) platforms and share dealing services administer £170bn of assets. Assets under administration in both the D2C and adviser platform market grew rapidly in 2016, by 15 per cent and 18 per cent respectively.
The FCA’s market study is looking at how platforms compete and their impact on the overall charges investors pay for their retail investment products.
It will publish its interim report in summer 2018, setting out any problems it sees in the market and any action it intends to take to tackle them.
The report will cover:
- the tools that platforms use to help consumers make informed investment decisions and evaluate the value for money of investing through a platform
- the ‘model’ portfolios and diagnose whether consumers can understand what these portfolios offer
- how platforms promote the products they offer and how this affects consumer choice. We will also assess what impact these relationships are having on competition.
Pensions strategy
This year the FCA’s focus is on producing a clear strategy that makes it easier for stakeholders to understand its role in the pensions sector. It is working closely with The Pensions Regulator to produce a joint Pensions Strategy which will set out how they will work together to tackle the key regulatory risks facing the pensions sector in the next 5-10 years.
The FCA will jointly host a series of stakeholder events and a webinar with The Pensions Regulator to ensure that all relevant issues are covered.
Impact of passive investment
Given the rapid growth in the proportion of investor wealth managed passively, the FCA wants to understand the economic implications of this development on both individual investors and UK financial markets generally.
By the end of 2018/19, the FCA plans to publish research that will look at the rise of passive management in the UK and will explore the impact on core aspects of financial market performance such as corporate governance, market efficiency and financial stability.
