The publication of the FCA’s Business Plan for 2019/20 set me thinking once again about the effectiveness of the regulation of retail financial services.

I’ve been in the industry long enough to remember the launch of many business plans by the self-regulatory authorities FIMBRA & LAUTRO subsequently merged into the Personal Investment Authority (PIA) then to become the FSA and in due course the FCA.

The stated objectives in the latest business plan – ignoring Brexit implications – are commendable. The continuing focus on “culture and governance” is to be welcomed as the deadline of December 2019 for implementation of the Senior Managers and Certification Regime across all regulated firms approaches. Those who have not read the excellent FCA discussion paper (DP 18/2) on “Transforming Culture in Financial Services” are recommended to do so. More specifically continuing to put the customer at the centre of their work on Retirement Outcomes is also heartening – albeit that not everyone agrees with all the policy recommendations.

However for me the way in which the FCA communicates and engages with parts of the industry on occasions still leaves a lot to be desired. The recent “Dear CEO” communication regarding defined benefit transfers and the implications for and impact on providers and ultimately the availability of advice is a good example. I believe this communication was well intentioned but in suggesting that providers were responsible for ensuring that “products are being recommended responsibly and appropriately” by regulated advisers the FCA must surely have anticipated that providers would be confused and some would baulk at the idea of taking on extra responsibility. Although the FCA via the media apparently withdrew any suggestion that providers were responsible for the suitability of advice the damage had been done and to date I believe three SIPP providers have said they will no longer accept DB transfers. Surely that can’t have been the FCA’s objective.

This is not the first time that SIPP providers have had to interpret the regulator’s views on the responsibility for advice. Back in 2009 in their first thematic review of SIPP Operators the FSA agreed that “SIPP Operators are not responsible for the SIPP advice given by third parties such as IFAs”. But they went onto say that “SIPP Operators cannot absolve themselves of any responsibility”. The problem with this and with the recent communications on DB transfers is that it leaves the door open to differing interpretations – and undoubtedly has fuelled the surge in SIPP claims to FOS and in the courts.

Like others in the industry I believe that the FCA needs to look more closely at how it discharges its responsibilities in this area and whether it can help achieve better outcomes for all parties involved through the publication of clearer and more detailed guidance. The FCA have three operational objectives under the Financial Services and Marketing Act. Two of those objectives are to protect the consumer and to protect the integrity of the UK financial system. The third is to “promote effective competition in the interest of consumers”. Whilst balancing those objectives is clearly challenging on occasions it seems that the third objective does not receive sufficient weight and attention. In their business plan the FCA say that in 2019/20 they “will engage with a broad range of stakeholders for their views” on the future of regulation. Hopefully these issues will feature in those discussions.

John Moret is principal of MoretoSIPPs consultancy and one of the UK's most experienced SIPPs experts, commentators and speakers. He has worked for Suffolk Life and several other SIPPs providers.

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