FCA and minister speak with optimism about the post-Brexit financial world

FCA and minister speak with optimism about the post-Brexit financial world

Assuming that it does eventually happen at some stage, the UK’s exit from the EU will certainly bring with it some major changes in the economy and in the way some financial services firms do business. However, Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority (FCA), and John Glen, a Treasury minister, have both recently given speeches expressing optimism about the economic outlook.

Addressing the UK Financial Services Industry Beyond Brexit Summit, Ms Delfas said that the Financial Policy Committee, which is independent of the Government, has concluded that the UK financial system is adequately prepared for a disorderly Brexit. Although the House of Commons indicated that it accepted the new UK/EU Withdrawal Agreement in principle last month, the agreement still needs to be approved formally by both Houses of Parliament when they re-convene after the forthcoming General Election. A no-deal Brexit remains possible as it is the legal default position if any withdrawal agreement cannot be ratified.

The FCA director then mentioned some of the measures the FCA has taken to minimise Brexit disruption, which include:

  • The Temporary Permissions Regime will allow European firms that currently operate in the UK using the ‘passporting’ system to continue to do so for a limited time after Brexit, before they needed to apply for full FCA authorisation. Some EU member states, but not all, have reciprocal agreements for UK firms who operate in the EU
  • The FCA has agreed Memoranda of Understanding with all European Supervisory Authorities and Member States, as well as with countries across the globe
  • The Temporary Transitional Power, which the FCA will use in the event of a no-deal exit, allows the regulator to delay or phase in changes to regulatory requirements made under the EU (Withdrawal) Act 2018 so firms can generally continue to comply with their regulatory obligations as they did prior to Brexit. The power has so far been extended to December 31 2020

Ms Delfas also remarked that, on exit day, the FCA’s rules will be much the same as they are now, and that these rules will be closely aligned with those that apply in the EU. After Brexit, the FCA will continue to work with European regulators, so it may well be the case that UK and EU rules remain closely aligned.

The Economic Secretary to the Treasury, John Glen MP, spoke at the same event, and also highlighted the extent to which the UK and EU will continue to co-operate regarding financial services legislation.

Here, Mr Glen commented:

“A deep and comprehensive relationship with the EU in financial services will help us [maintain the strength of UK financial services]. It will preserve cross-border market access in key areas, but also give us the freedom to set our own rules to enable the sector to thrive, while ensuring continued financial stability in the UK and the rest of Europe.”

He added that the text of the Political Declaration, which accompanies the UK Government’s Withdrawal Agreement, ensures close cooperation on regulatory and supervisory matters.

Ms Delfas’s speech mentioned that the FCA “may have some flexibility around EU rules we have onshored, particularly where experience shows them not to be working efficiently or effectively.” However, her comments about the way European regulators will continue to work together means that any firm expecting a significant decrease in their regulatory burden after Brexit is likely to be disappointed.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article


MAPS reveals concerns about public’s lack of pensions knowledge

The Money And Pensions Service (MAPS), the single financial guidance body set up by the Government, has revealed its concerns over the general public’s lack of knowledge regarding pension savings.

The Service’s survey asked respondents to indicate whether they believed certain statements regarding pensions were true, or false, or whether they were unaware if the statement was true or false.

The results included:

  • 57% did not know that they can access their pension early were they to be forced to retire early with a serious illness – 18% believed this statement was false and 39% responded with ‘don’t know’
  • The majority of respondents indicated that they believed it could be true that pension savings growth rates could be similar to those in a savings account – 18% said this was true and 34% answered ‘don’t know’ to this question
  • Only 14% definitely knew that pension contributions could continue while on parental leave – here the MAPS press release also reveals that women were less likely to be aware of the correct position here, with only 39% of women aware that they could definitely continue with contributions in these circumstances, compared to 49% of male respondents
  • Only 37% knew that there was still tax relief on self-employed pension contributions, although this was based on the responses of all participants and it is not necessarily the case that the majority of self-employed people are in the dark about this

More positively:

  • 78% knew they could commence pension savings as soon as they were in employment, no matter how young they might be
  • 67% were aware they could leave their savings growing in pension schemes until they needed to access it
  • 60% knew there were benefits to paying more than the minimum contributions to a workplace pension, and 65% said that they were aware they still needed to monitor their contribution levels once they had been auto-enrolled
  • Only 13% thought they would lose their entire workplace-based pension savings were their employer to go bust and 51% knew that this was false

Caroline Siarkiewicz, Acting CEO of MAPS, said of the survey findings:

“It’s clear that many people are unaware of their options when it comes to important events in their lives that can impact their pensions such as becoming a parent or starting their own business. Women in particular have many important financial decisions to make when transitioning into parenthood, but our findings suggest they are less likely to be aware of their pension options.

“It is positive to see that people have an understanding of how automatic enrolment works. However, our findings suggest that many might be missing out on important information when making decisions affecting their pensions.”

MAPS has completed the appointments to its steering group for the pension dashboard, the initiative that will allow consumers to view all of their pension savings in once place.

However, the Service still wants to hear from industry representatives interested in serving on a dashboard industry working group.

 The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article


MAPS responds to FCA vulnerability consultation

The Money and Pensions Service (MAPS), the single financial guidance body set up by the Government, has become the latest organisation to respond to the Financial Conduct Authority (FCA) vulnerable customers consultation.

MAPS begins its response by acknowledging more needs to be done to protect vulnerable customers than is the case at the moment, commenting:

“We agree with the FCA that firms need to go further to ensure that customers in vulnerable circumstances achieve similar outcomes to others, and that they are treated fairly in relation to purchasing products and services, and we welcome the FCA’s work to support firms to do more.”

It later described the existing FCA document as “not likely to achieve a step change” in treatment of vulnerable customers.

The Service makes reference to other FCA proposals to impose a new formal duty of care requirement and suggests this could deliver improved protection for vulnerable customers. While the regulator appears to have placed its duty of care initiative on hold at present, MAPS still says that the content of the duty of care document provides “greater clarity for firms on what ‘good’ looks like in serving customers in vulnerable circumstances and identifying how this runs through each stage of customer interaction.”

MAPS says it does not believe that the guidance emphasises sufficiently that senior managers have a duty to ensure the culture within firms enables them to effectively meet the needs of vulnerable customers.

The organisation then highlights that there is a danger too much emphasis could be placed on the obligations of customer-facing staff when looking at this issue. It is also vital, in MAPS’ view, that staff who design products, services and customer journeys fully understand the challenges and needs of vulnerable customers. MAPS goes on to recommend that firms should identify stages of the customer journey where the needs of vulnerable customers may not be satisfied at present.

The Service acknowledges that the FCA does not intend to create new detailed Handbook rules on the vulnerability issue. However, the response calls on the regulator to clarify the legal status of the proposals, especially regarding how the FCA can take enforcement action for breaches of the guidance.

MAPS specifically reminds firms and the FCA of two of the stated outcomes of the guidance:

  • Vulnerable customers should receive outcomes that are at least as good as those experienced by non-vulnerable customers
  • There needs to be consistency across different firms and sectors of the industry so vulnerable customers receive fair treatment regardless of the product they are buying/considering buying, or the nature of the financial service they are accessing

Another important issue the MAPS response covers is that it may not be sufficient for firms to use complaints data in assessing vulnerabilities in their customer base, as sometimes vulnerable customers may not complain as they find the idea of making a complaint too daunting.

MAPS suggests firms should have a ‘mission statement’ relating to its handling of vulnerable customers, and that information about the availability and nature of support resources should be given prominence in marketing materials and websites.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article


FCA & minister speak about the fight against financial crime

Megan Butler, Executive Director of Supervision – Investment, Wholesale and Specialists at the Financial Conduct Authority (FCA), spoke of how positive use of technology can assist the fight against financial crime, when she spoke at the Royal United Services Institute in late October 2019.

With hundreds of billions of pounds laundered through the UK every year and the estimated annual cost of fraud in the UK standing at £190 billion, financial crime activities undoubtedly cause considerable damage to our society. The number of fraud offences has risen by 17% over the last 12 months and 15,000 UK consumers called the FCA in the last 12 months to report scams and fraud.

In part, the fight against financial crime can be facilitated by firms and regulators alike having appropriate systems and controls. However, the pace of technological change and the ever-evolving nature of criminal activity requires the industry’s systems and controls to adapt to a changing threat.

The 2,000 firms who participated in the FCA’s first annual Financial Crime Data Return in 2017 made more than 360,000 Suspicious Activity Reports to the National Crime Agency during the course of the year.

The FCA director acknowledged that it is not always easy for firms to identify suspicious activity when she commented:

“What certainly remains the case is that spotting bad behaviour is not easy, particularly when it lurks within an ocean of legitimate activity – the so-called ‘needle in a haystack’ challenge.”

More positively, Ms Butler said many firms were using technology to flag risks and then manually reviewing the identified red flags. Giving a specific example, she said that technology now existed to verify whether photos in different ID documents matched.

Next, she commented that a number of firms had used the FCA’s Sandbox to test digital identity checking systems.

After saying “the FCA has high expectations of ourselves – and firms” in this area, Ms Butler then returned to the topic of how technology can make a difference in her closing remarks:

“Technology, frequently an enabler of crime, can also be a hugely potent tool in the fight against it. Indeed, it may be the greatest tool we have, giving us the chance of finding that needle in the haystack. So, if I could leave industry with one message today it would be don’t be afraid to use technology and innovate to keep criminals out.”

In a speech a few days earlier at Chatham House, the Government’s Economic Secretary John Glen MP also highlighted the impact financial crime can have on ordinary consumers, commenting:

“Tackling dirty money isn’t just about keeping corporate balance sheets clean – it’s about the wellbeing of real people.”

Having spoken to victims of the high-profile issues affecting a mini-bond firm, Mr Glen said that “their stories are truly heartbreaking.”

As an example of the changing criminal methods that would feature in Ms Butler’s speech, he mentioned “foreign criminal gangs co-opting international students at British universities in order to launder money through UK banks.”

The minister acknowledged that more could be done to improve collaboration between public and private organisations in fighting financial crime, and also that the Financial Action Task Force had advised the Government to overhaul the IT systems it currently uses to handle Suspicious Activity Reports.

In conclusion, Mr Glen summarised the way forward by saying:

“I have one concluding message for you this morning it is that Brexit must not – and will not – knock us off course. There will be no weakening of our resolve. If anything, Brexit must be the spur to go further. Our competitiveness, our economic strength as a nation, is predicated on being a safe place to do business.

“And if we do wish to forge new economic partnerships around the world, and if we are to conquer the markets of the future, then we need to ensure this remains the case. This goal requires a team effort, shared across the private and public sector, with civil society, and between the UK and our international partners.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article


Adviser trade body looks to the future at its annual summit

The Personal Investment Management & Financial Advice Association (PIMFA) was looking to the future when it held its Annual Summit in October 2019. The audience were told that the key issues facing the financial services industry at present included Brexit, the economic cycle and the changing landscape of society.


Maarten Heukshorst, Chief Commercial Officer at financial business solutions provider Pershing, echoed one of the Financial Conduct Authority’s recent webinars by highlighting the importance of having a positive corporate culture when he said:

“As an employer, we want to address all areas of diversity. We are now focusing on unconscious bias and invested in a gender decoder software we run job descriptions through, as the language used in both marketing materials and job advertisements tends to be very masculine and can be off-putting to many demographics.”

Holly Mackay, Founder and CEO of financial guidance website Boring Money, spoke about the benefits of firms embracing diversity, by saying:

“The industry is stuck and thinks about things in certain ways because Boards and firms often look the same and come from very similar backgrounds – it can feel like a club that not everyone is invited to join”.

She added that the industry needed to adapt to the changing nature of society, commenting that:

“At the moment the industry is life-event driven, focusing on inheritance, and such. It is not looking at the future generation who don’t have a great deal of money to invest…yet. We need to do a better job of making the conversations more meaningful, relevant and easier to understand.”

PIMFA’s Chairman, the Rt. Hon. Lord Deben – the former MP John Gummer – closed the Summit by re-iterating the need to move with the times, saying:

“Adapting to change, through diversity, inclusivity, technology etc. is not an ‘add on’, but a representation of where we are going and how the world is moving. PIMFA gives a voice to our now-united industry which deserves to be heard. We must be a step ahead to move the whole system forward and our job is to make sure our clients benefit from the changes.”

Brexit is of course one change which has now been delayed further. The UK is now scheduled to leave the European Union on January 31 2020. It means it is business as usual for the time being, but the continued uncertainty is causing issues for firms in all business sectors, who still don’t know exactly when Brexit will happen, and what the terms of the UK’s exit will be.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article


Money Advice Trust responds to FCA vulnerability consultation

The Money Advice Trust has become the latest organisation to respond to the FCA vulnerability consultation.

The response starts by describing the FCA focus on vulnerability as a “crucial agenda”. The Trust asks the FCA to:

  • Publish a guidance document on the issue of firms’ vulnerability obligations, made up of extracts from various areas of its Handbook. This guide should include a list of reasons why customers may be vulnerable. It should also provide details of the customer outcomes the FCA expects to see
  • Explain how SM&CR will link to its work on vulnerability
  • Provide greater clarity on what is practically expected from firms in terms of behaviours and outcomes
  • Adopt a mission statement worded along the lines of: “firms should always work to identify, understand, and respond to what detriment consumers are ‘vulnerable to’”
  • Provide more guidance as to how firms should treat customers with mental health issues
  • Provide more guidance on how firms should comply with the Equality Act 2010, which covers how firms should act when they are aware, or have reason to suspect, that a customer is disabled in some way
  • Provide more guidance on how firms can record information about a customer’s vulnerability without breaching data protection law. Recording information about vulnerabilities can save customers having to explain their issues all over again just because they are speaking to a different member of staff.
  • Explain how it defines a ‘customer outcome’ as the Trust says it has seen examples of firms adopting their own interpretations, including some who regard a ‘positive outcome’ as being the same as providing good customer service
  • Assist firms to identify what form of detriment a customer with a particular issue could be exposed to. For example, if a firm knows a customer lacks mental capacity, what specific detriment could be suffered by that individual, and how could the firm mitigate these risks?
  • Emphasise to firms that they need to provide bespoke vulnerability training to their staff. The Trust says this training must provide details of how the firm’s regulatory obligations relate to the everyday situations, contexts, and tasks that staff experience. Going further, the Trust asks the FCA to stress to firms that simply asking a training provider to deliver an ‘off the shelf’ generic training course to their staff might not be sufficient


The Trust’s consultation response also asks firms to consider that some customers might be both ‘potentially vulnerable’ and ‘actually vulnerable’ at the same time. For example, a customer who is ill might be ‘actually vulnerable’ as a direct result of their illness, and they may also be ‘potentially vulnerable’ if the illness leads to a loss of earnings in the near future. The Trust calls on the FCA to consider using the terms ‘at greater risk of future harm’ and ‘currently experiencing harm’ instead of ‘potentially vulnerable’ and ‘actually vulnerable’.

Finally, the Trust asks firms to ensure their staff are aware of the various external bodies that can assist with certain vulnerabilities. Examples might include charities, GPs, addiction management services, organisations like the Samaritans, and debt counsellors.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


FCA director speaks about the future of regulation and emphasises the importance of good customer outcomes

Christopher Woolard, Executive Director of Strategy and Competition at the Financial Conduct Authority (FCA) spoke at length on the subject of ‘regulation in a changing world’ at the City of London / Cicero Future of Regulation conference in late October 2019.

In the opening section of his speech, Mr Woolard mentioned that there had been a number of changes to the rulebook in the last decade. All authorised firms are of course all too aware of this, but the FCA director also observed that, in recent years, the public’s expectations of what they deserve from financial firms has increased.

Mr Woolard mentioned three types of regulatory changes that had occurred recently:

  • Action taken in response to developing market trends, or as a result of the financial crisis of the last decade. Examples include the stricter capital resources requirements firms now face; and initiatives to increase the accountability of a firm’s leadership team
  • Changes that have occurred as a result of technological change, such as artificial intelligence and machine learning initiatives
  • Changes in consumer needs, which might include:
  • An increased focus on investment returns, especially as rates on savings accounts have been so low for many years now
  • A reduction in some consumers’ tolerance for loss
  • The ageing population and the fact people now inherit assets later in life as a result
  • The reduction in the average level of personal savings

He then expanded on these issues by commenting on the reduction in the number of people who have final salary pension provision, and on the increased choices introduced via the pension freedoms. Mr Woolard observed here that many consumers wanted assistance to guide them through the various options, but at the same time these individuals were unwilling to pay large fees for professional advice. He then acknowledged that many advisory firms were unwilling to take on clients with small pension pots and described the situation as “a stand-off where no one is happy”.

Mr Woolard suggested that many people were focussing on the wrong area when seeking to access their retirement savings, saying:

“Is it any surprise, then, that although regulators, politicians and firms agree that consumers should make informed decisions about their finances in retirement, most end up focusing on their 25% tax free cash, neglecting to make a plan for the remaining 75%?”

The FCA director also commented:

“Consumers now have the option to invest in high risk, high return products, even if they don’t have a sophisticated understanding of those risks.”

His speech then moved on to the Duty of Care debate, where a number of senior figures from the FCA have suggested that a new obligation could soon be imposed on firms, where it would be highlighted that they have a duty to ensure their customers receive appropriate outcomes.

Mr Woolard said that his organisation will be issuing “an open invitation for your thoughts and ideas” to authorised firms and added that there will be a formal consultation on the Duty of Care proposals.

He then listed five elements that could form part of the FCA’s future strategy:

  • Identifying exactly what outcomes the regulator wants to see – here he mentioned that, while firms had to make a profit, the FCA didn’t wish to see customers ripped off through excessive charging. However, he added that consumers need to realise investing is not a risk-free activity
  • Using the powers granted to the FCA by Parliament – the diverse list of powers that Mr Woolard reeled off included the Senior Managers Regime, Project Innovate, price caps, pension investment pathways and the payment protection insurance deadline campaign
  • Working with other authorities, such as the Government and the Information Commissioner
  • Reviewing the Handbook and the Principles for Business, for example he said the FCA could consider extending the scope of the Principles, perhaps requiring firms to ensure consumer understanding
  • Considering how technology can help deliver positive consumer outcomes

Mr Woolard also spoke about outcomes in his closing remarks:

“We have the opportunity to re-shape how financial services regulation works in the UK. The FCA has a key role to play – improving how markets operate, preventing harm from occurring and serving the public interest. It is only right for us to constantly assess the direction of travel and tailor our approach to ensure we continue to deliver on our objectives.

“To achieve this, we need regulation that is agile and doesn’t become outdated as domestic and global markets evolve, resulting in inefficiencies and consumers being unduly exposed to risk and harm. This requires a bold approach and the full use of tools given to us by Parliament. It also means a focus on simplicity, clarity and real-world effectiveness. By putting outcomes at the heart of the debate in the coming months we want to ensure financial services markets serve the public interest, now and in the long term.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

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