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Dear CEO/Director | Release Date: 5th December 2022

To read a longer summary of this Dear CEO/Director letter, click here.

To access the original FCA document, click here.

Short Summary

The FCA’s “Portfolio Strategy Letter for Financial Advisers and Intermediaries” reiterates the agency’s focus on improving consumer protection in the financial advisory sector. Following the introduction of the Consumer Duty Policy Statement (PS22/9) and Finalised Guidance (FG22/5) on 27 July 2022, which sets higher standards for consumer protection, the letter outlines the significant role financial advisers have in guiding consumers through complex financial decisions, particularly in the current economic climate marked by rising living costs and inflation.

Key points include the necessity for financial advisers to provide suitable advice that aligns with their clients’ long-term financial well-being and objectives. The letter highlights ongoing concerns about unsuitable pension transfer advice and the potential for irreversible harm to consumers’ retirement plans. Firms are expected to conduct robust due diligence on investments and avoid conflicts of interest that could lead to unsuitable advice.

The FCA stresses the importance of firms maintaining financial resilience to manage liabilities and avoid practices like phoenixing, where liabilities are abandoned in firm failures only to reappear in new entities. This behaviour is scrutinised closely, with significant consequences for non-compliance.

Looking ahead, the FCA plans to focus on retirement income advice, monitoring for unsuitable advice, and ensuring firms comply with new regulations like the Consumer Duty. This will include specific actions to address the risks associated with pension and investment scams and to improve the overall quality of financial advice.

Firms are urged to ensure all practices and advisories align with the heightened standards set forth by the FCA, preparing for stricter scrutiny and potential enforcement actions for non-compliance. Key actions for firms include enhancing the transparency and suitability of advice, particularly in pension transfers, and ensuring all financial advice supports the consumers’ best interests amidst challenging economic conditions.

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