Regulate and Reform – Managing the new risks, rules, and requirements

Financial Advisory

05 October 2023

AdviceConsumer DutyFCAFinancial AdvisoryRegulationsustainableWinning Advisers

Expert: Sandy McGregor, Head of Policy, SimplyBiz Facilitator: Rupert Neville, Senior Change Management Consultant


  1. Advice Gap:

There is concern that many of the initiatives from the FCA are only serving to widen the advice gap at a time when consumers need advice more than ever, particular in light of the harm that is done through fraud.

  1. Consultation Papers:
    There are a number of consultation papers pending for advice firms including around capital adequacy, FSCS reform and sustainable investment advice. This is a chance for us all to shape future regulation.
  2. Edinburgh Reforms:

Whilst these reforms are further in the future, this is a chance to revisit some areas of regulation that have not worked for the UK model, and where they have had disproportionate effect on smaller firms, e.g. around IDD CPD, reporting and SM&CR.

  1. Consumer Duty and Retirement Income Advice review:

The key focus areas now we are post-implementation of CD and how the retirement income advice thematic review could feed into a firms ongoing assessment of delivering good outcomes.



Consensus was whilst building trust in the financial services sector as a whole is important, the Consumer Duty may have only served to widen the “advice gap” in the financial advice space.  The FCA seems to be driving us back to a place where the bank assurance model is most prominent, by removing or discouraging small firms from operating in the community.  Concern was raised around the problem with fraud, and the lack of protection for consumers in this space, those that cannot afford, or access regulated advice are vulnerable to this type of exploitation.


The group discussed the fact that there are a number of Consultation Papers pending by end of 2023 which will shape the immediate direction of regulation.  There is a consultation due on capital adequacy for investment advice only firms (non-MIFID) and also on FSCS.  This is an opportunity for all to feedback to the regulator.  This is an opportunity to work to reduce the FSCS levy for advice firms which has been unsustainably high in recent years and call-in others in the distribution chain (providers and platforms to take more responsibility).


There is also a consultation paper due on sustainable investment advice.  This will supplement the publication of final rules establishing ‘investment product labels’.  Whilst this greater clarify was welcome by those in the room there was still concern around potential for greenwashing and confusion around what exactly is held in these products, and whether clients will be willing to pay more or accept more risk to invest in sustainable product solutions.


Edinburgh reforms were welcomed and is an opportunity for our industry. For instance, a chance to look at the Insurance Distribution Directive requirement for 15 hours CPD, and unusable key features documentation. Advisors felt this requirement was ridiculous and achieved nothing.  The removal of the 10% depreciation reporting rule already was welcome, and other similar common-sense reforms should be looked at.  There was concern that SM&CR perhaps hadn’t had the required affect for smaller firms (the issue of proportionality again).  More needed to be done to use this regulation to remove the “bad apples” from the industry.

While the Edinburgh Reforms are broadly welcomed especially when it comes to looking at the Senior Managers & Certification Regime (SM&CR) which all agreed has not worked, there was a desire to widen reviews.


The focus for firms post implementation of CD should be on the ten key questions that the FCA has published and stated that firms should expect to be asked.  Firms should be well placed to answer these based on many good processes and procedures that were in place.  Firms also need to start thinking about what data and MI they will have to feed into their annual assessment.


Sandy has uploaded to the portal, post the conference, some slides looking at the ten key questions and with some pointers to show that they are meeting the Consumer Duty requirements.


The outcome of the Retirement Income Advice is keenly awaited and in particular it will be useful for firms to see the data that has been collected by the FCA, in a way that allows them to benchmark their business against others and increase awareness around what good and bad practice looks like.   All agreed that if the FCA provided the clarity then they would amend processes accordingly as they genuinely want to be seen to be doing the right thing.


Key takeaways:

  • Engagement from the FCA in this type of forum is welcome, but more needs to be done to address challenges such as the issue of ‘proportionality’ under Consumer Duty
  • It was welcome that the FCA was willing to engage with industry in this way through the Keynote speech from Nick McGruer, Head of Department for Consumer investments and Supervision at the FCA. There was a surprise that the FCA could not yet articulate “proportionality”, without this clarity it is playing into the hands of the “ambulance chasers” who work off hindsight, which means businesses are becoming more prudent when taking on clients
  • Sandy McGregor, who is involved in the consultation process with the FCA, will use the output from the roundtable to feedback to the FCA. However, please note any firms can submit a consultation response