Professional Adviser

Inducements, CCLs and RDR reviews: Looking back on a summer of regulation

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David Thomson
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In a new monthly feature, the CII's David Thomson provides an update on the key regulatory events of the past few weeks and takes a look at what can be expected next.

Summer 2013 will be remembered as a busy time for the Financial Conduct Authority (FCA), which took the six-month anniversary of the Retail Distribution Review (RDR) as a pertinent moment to reflect on developments so far by publishing the much-anticipated official figures on retail investment advisers in the UK.

The study revealed that UK retail investment adviser numbers have risen since the introduction of the RDR, from 31,132 in December 2012 to 32,690 in July. This trend was echoed in the CII Group’s publication of SPS numbers, showing more than 21,500 unique statements have been issued so far.

Clearly, the impact on adviser numbers both pre- and post-RDR has not transpired to the extent previously predicted and, while we continue to see a growing advice gap emerge, the impact here has also been less dramatic than feared. The FCA is engaging in a more balanced and pragmatic way than was the case with its predecessor and it does seem more focused on delivering better consumer outcomes, rather than retrospectively responding to poor ones.

Looking back on a summer of regulation

In other RDR-related news, September saw the FCA publish a review to find out whether firms continue to be influenced by inducements from product providers. It found some life insurance firms had arrangements in place which could influence advisers, contrary to the RDR’s aim of removing commission bias.

Many of the firms involved in this review met the requirements and, where areas of concern were highlighted, these have now been addressed accordingly. Two firms have, however, been referred to enforcement in specific cases where the FCA identified potential rule breaches.

Consumer credit

From 1 April 2014, the FCA will take over responsibility of consumer credit from the Office of Fair Trading (OFT) and there have been a number of consultations and pronouncements from the regulator relating to this new regime.

The FCA will take over both the standards and enforcement of the Consumer Credit Act (CCA) and related instruments. Financial planners giving advice to public, sole traders or small partnerships on anything to do with unsecured credit may need a consumer credit licence (CCL) issued by the OFT. Those without one could be liable for criminal prosecution.

Advisers are likely to need several categories of CCL if they provide any advice or services related to unsecured debt. The broad categories are: advice and managing debt, introductions to firms that offer credit, negotiations on consolidating debt, checking credit ratings or obtaining credit status.

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