The FCA has admitted it could share more of its information to help the financial sector understand what bad conduct looks like.
Debbie Gupta, director of Life Insurance and Financial Advice at the FCA told the personal finance Society’s annual conference that the FCA sat in a unique position of being able to see, first hand, what bad conduct looked like.
“From our point of view, yes we are doing lots of work on rooting out bad practice, but I also think one of the things the regulator is privileged to see, in a slightly roundabout way, is what bad practice looks like.”
The FCA has chosen to take action on an advice market which it says is, too often, letting customers down. The area concerning the regulator most is defined benefits.
According to a survey from the regulator, advice in this sector is all too often ‘still not of an acceptable standard.’
The regulatory started out by asking advice firms with defined benefit transfer permissions to return data about their activities before following up with site visits. It quickly raised concerns when it found that 60% of firms providing transfer advice have recommended 75% or more of its clients to transfer.
It recently sent out letters to 1,600 companies about their advice surrounding transfers, more than half of the 2,500 advice firms working in the sector. The companies contacted have been given two months to make changes and get their houses in order.
Gupta says the regulator is seeing evidence every day where firms are failing to provide significant advice to clients. This data, can prove useful in creating a picture of what bad culture looks like.
The move feeds into their ongoing aim to reduce non compliance by improving general culture. As we’ve covered in the past it is already focusing on a company’s conduct as an indicator of potential non-compliance and it now appears to believe that this data can offer learnings to the wider sector about what bad culture looks like and how it can be avoided.
It’s a similar principle to the Enforcd Regulatory Database. By compiling details of enforcement actions taken across the financial sector it is possible to build a picture of where companies are going wrong and what they could have done to avoid problems in the first place. (If you would like more information on access to the Enforcd Regulatory Database please get in touch here.)
A look at the cases on the database shows common problems cropping up in terms of incentives, data management and governance. The FCA does indeed have a privileged position which can help to shine a light on the key warning signs of non-compliance.
However, it can also share details of good culture, giving firms a positive template on which to work. By doing so, it can give firms a guide including plenty of DOs, as well as the DON’Ts.