The FCA has published its business plan for 2017/18 setting out its priorities for the year ahead. The business plan incorporates the risk outlook, which identifies the key trends and implications for the regulated firms and markets as well as the emerging risks for the future.
The FCA has highlighted the following cross-sector priorities:
- Firms’ culture and governance – poor cultures and weak governance drives behaviours that deliver inappropriate outcomes for consumers and markets.
- Financial crime and anti-money laundering – improvements to ensure appropriate and proportionate. safeguards to protect whilst avoiding unintended consequences such as excessive delays or exclusion.
- Promoting competition and innovation – eg FinTech business models shift risk from financial firms to consumers without them understanding the implications.
- Technological change and resilience - eg cyber attacks are increasing and pose risk to consumers and markets.
- Treatment of existing customers – eg firms may apply unjustified exit and switching fees, or a lack of transparency.
- Consumer vulnerability and access – eg societal and technological changes have increased the scope and sophistication of financial services which may affect consumers which are less capable of understanding them.
Key sector specific issues highlighted by the FCA:
Wholesale financial markets
- Conflicts of interest and market abuse.
- Resilience to technology and cyber risk.
- Effective competition is undermined.
- Weak price competition with investors paying too much for investment management services.
- Poor advice from investment consultants.
- Disorderly failure of investment portfolios and market abuse.
- Providers of critical services, including custody may not be able to meet service standards and ensure continuity of services.
Pensions and retirement income
- Consumers cannot or do not want to get adequate advice.
- Consumers cannot access and compare pension products.
- Pension freedoms and other changes means consumers are at greater risk of being targeted by different scams.
- Insufficient operational resilience due to legacy IT systems.
- Implementing ring-fencing creates a number of operational challenges.
- Poor controls mean that firms might fail to identify and adequately manage money laundering risks.
- De-risking and cost cutting may leave customers with a lack of access to services needed.
- Consumers in financial difficulties may be treated unfairly by firms.
- Inadequate affordability assessments.
- Consumers may suffer detriment through poor firm conduct.
- Some consumers who can afford credit may have trouble accessing it.
General insurance and protection
- IT failures, data protection issues, risk of cyber-attacks and lack of effective systems and controls.
- Intense competition can lead to poor advice.
- Customers could choose unsuitable products by focusing on headline price rather than on suitability.
- Investors with modest means may lack access to, or awareness of, suitable advice.
- Advisers may give insufficient attention to the total cost of investment products and of advice.
- Self-directed investors are at risk of receiving products inappropriate for their risk appetite.
- Some peer-to-peer and crowdfunding firms may not be CASS compliant.
Our experts would be happy to discuss each of these areas with you in more detail, contact David Fenton.