4 June 2020
Regulator working on how to avoid ‘lumpy bills’ for firms in future, FCA Executive Director of Supervision, Megan Butler, tells PIMFA’s Virtual Fest
The Financial Conduct Authority (FCA) is working on how to avoid firms being left with “lumpy bills” in future following the COVID-19 pandemic, FCA executive director of supervision, Megan Butler, told delegates in her keynote speech at the second day of PIMFA’s Virtual Fest (4 June).
Wealth managers and financial advisers had responded well during the crisis and firms were adapting well to the new normal, she said. But she cautioned the regulator could not “overlook financial resilience”.
As a result Ms Butler said firms would be receiving a short simple impact survey next week from the FCA, asking firms to provide details about their financial health “because financial pressures can cause harm to customers if firms cut corners on governance… market volatility can reveal previous mis-selling and the need for redress”.
She added the FCA expected to write to firms holding client money shortly about how to protect it. “We will assess how the wealth and advice market has responded to changes but we continue to expect firms to provide suitable advice. Firms must continue to act with integrity, charge reasonable fees and prevent fraud,” Ms Butler said.
Areas of concern remained around phoenixing and life-boating of firms: whereby firms preemptively set up new entities or acquired new firms before closing down. While one of the more egregious practices identified in recent times had been that of advisers leaving firms that had fallen foul of regulations and joining claims management companies to seek compensation against the firm they had recently left.
At the same time Ms Butler admitted there were continuing tensions regarding the FSCS levy, notwithstanding the fact that product providers were now required to contribute to it, which benefited PIMFA members.
One of the reasons for conducting the upcoming survey was so the regulator could get a sense of the financial wellbeing of firms. “We are trying to get a much greater, more granular sense of what the pipeline might look like,” she said.
She added the regulator was moving more towards an “outcomes-based approach” to regulation, suggesting this was better, both for firms and supervisors, However, work needed to be done to identify those firms that needed help. She commented: “How does a regulator find firms that need help to improve, because there are some firms that want to do better, but there are also firms that have no place in the industry so it’s about identifying them.”
Elaborating she said that “data is crucial and we need systems that gather up this information, analyse it and identify firms that need action. That’s where an awful lot of our focus is at the moment. So how do we use data to focus our supervisory attention on firms that are more likely to do harm?”
Among the chief concerns for the regulator in the wake of COVID-19 was the threat of an increase in scams. Ms Butler said it was “deeply depressing but entirely predictable” that there were already people taking advantage of the current crisis but that the industry and the regulator needed to work together and remain vigilant.
“We need to think about that and respond more quickly. We’re keeping our scam smart material as up-to-date as possible. We’ve got very good connections into law enforcement and we are putting that information on our website as soon as possible. We are very focused on this issue,” she added.
Liz Field, Chief Executive of PIMFA commented: “I’m grateful to Megan Butler for her time and her insights on the future of regulation and also the current response to the COIVD-19 pandemic.
“Protecting consumers from scams and ensuring best practice will always be at the forefront of the vast majority of wealth managers’ and financial advisers’ minds. But as we have often said before, the increases to the FSCS levy, particularly this past 18 months, results in good firms are being punished financially for the behaviour of bad.
“It is promising to hear that the FCA wants to take a more data-led approach to identifying those firms that either need more supervisory support or that simply should not be on its register. It is also a relief to hear that the FCA wants to avoid unexpectedly large bills for firms that see treating their customers well, let alone fairly, as a prerequisite of being in business in the first place.
“We will, as always, engage in a positive and constructive way with the regulator to ensure best practice in the industry, protect consumers both from scams and rogue firms, and forge a path towards a regulatory regime that works for all.”
In order to support the work of the FCA in protecting consumers from scams, and as part of its Financial and Mental Wellbeing Campaign, PIMFA has recently launched the Scam Safe microsite, which can be found here: pimfa.cc/scam-safe
PIMFA’s online Virtual Fest will run for the second day today (4 June) and registrations remain open, find out more here. This ground-breaking event would not have been possible without the support of PIMFA members and partners including Royal London Asset Management, SIX Group, Worksmart, Mitigo Cyber Security, Octo Members and Money Marketing.
< ENDS >
Notes for Editors
About PIMFA – the Personal Investment Management & Financial Advice Association
· PIMFA is the trade association for firms that provide investment management and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
· The sector currently looks after £1.5 trillion in private savings and investments and employs over 55,000 people.
· PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families, to charities and pension funds, all the way to trusts and companies. Associate members provide professional services to the PIMFA community.
· PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
· PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
· Further information can be found at www.pimfa.co.uk
For further information on this release or other press matters please contact:
· Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376 / +44 (0)7843 903258
· Sheena Gillett, PIMFA Communications & PR Director – email@example.com, +44 (0)20 7011 9869 / +44 (0)7979 493225