Financial Conduct Authority Publishes Statement on the Suitability Review

The Financial Conduct Authority has published the results of a review into the suitability of advice and quality of disclosure in the financial services sector. The FCA assessed 1,142 individual pieces of advice against the suitability and disclosure rules in the Conduct of Business sourcebook. The FCA found that the majority of firms provided suitable advice although there were instances of unclear and unsuitable advice. The results on disclosure were less positive with only half of the firms complying with the FCA's disclosure rules. The main area of unacceptable disclosure related to firms' initial disclosure of firms' costs and services, which involved providing charging structures with wide ranges, and a failure to indicate the number of hours for the provision of a service where hourly charging rates were used.

The FCA expects firms to consider the results, particularly where there are issues that continuously arise, and consider whether improvements could be made. In addition, firms should consider the changes to advice and disclosure requirements that the revised Markets in Financial Instruments package will introduce, as well as those in the Packaged Retail and Insurance-based Investment Products Regulation and the Insurance Distribution Directive. The FCA will repeat the review in 2019 to assess, among other things, how firms have implemented these new requirements. In the shorter term, the FCA intends to commence a communication programme that will run throughout 2017 and into 2018 to provide further clarification on its expectations (by, for example, providing examples of good and bad practice) and to start a dialogue with firms on how to work together to improve the areas of concern.

View the FCA's statement on the Suitability Review.