UK FCA consults on simplifying pensions and investment advice rules

The UK Financial Conduct Authority (FCA) has published consultation paper CP26/10 on simplifying rules relating to providing pensions and investment advice to consumers. With the targeted support rules now in place, the FCA's focus is on completing its outstanding policy work so that the market can develop and deliver a wide range of support for consumers. The consultation delivers on two separate commitments: (i) to consolidate, simplify and reframe the advice rules; and (ii) to review the FCA's existing rules relating to financial advisers' ongoing services. These changes will complement targeted support and enable firms to provide a range of services to meet different consumer needs.

Key proposals include:

• Consolidating the suitability requirements in the Code of Business Sourcebook (COBS) 9 and COBS 9A into one set of common rules and expectations.
• Clarifying the existing flexibility in the FCA's suitability rules to offer different advice services and different recommendations to different clients, by replacing the rule requirement to consider "necessary" information with an expectation that advisers consider "sufficient" information when assessing suitability.
• Clarifying that firms do not always need to assess a customer's knowledge and experience before making a recommendation, where the type of product the firm envisages recommending is one reasonably identified as having a target market that includes clients with no experience in investing.
• Introducing a single "attitude to risk" concept in the rules, clarifying that firms do not need to use complex tools or detailed questionnaires to assess it, and confirming that firms can take a proportionate approach when determining a client's ability to bear losses.
• Consolidating the timing and content requirements that currently apply to the provision of suitability reports for different types of businesses.
• Retiring FG17/8 guidance, embedding its principles of proportionality directly into Handbook rules, supported by updated case studies to illustrate how firms can take a proportionate approach when assessing suitability.
• Replacing the annual suitability review with periodic reviews based on clients' needs.
• Clarifying how firms support disengaged clients, underpinned by the consumer duty.

The consultation also includes the following forward-looking discussion chapters where the FCA is inviting initial feedback but not yet consulting on proposals:

• Chapter 4 on trail commission payable to advisers and commission for non-advised distribution, to modernise the rules and to prevent potential consumer harm.
• Chapter 5 on the suitability requirements that should apply to advice provided to professional clients. In the draft rules, the FCA proposes to apply the new rules to services provided to professional clients in broadly the same way that current rules apply to such services.

The deadline for comments is 22 May. The FCA is aiming to publish a final policy statement in Q4.

Return to main website.