The introduction of the Consumer Duty transformed the landscape for regulation in 2023, but it’s fair to say 2024 was the year that changed it forever.
It felt, from our perspective at the Money Marketing towers at least, barely a week went by without a new announcement for us to get our heads around and report on.
I can only imagine how difficult it must be for advice firms to both keep up with and implement the rules, and ensure they are adhering to them.
It’s almost impossible to cover every regulatory change in one article, but let’s focus on some of the most significant.
It all started in February, when the Financial Conduct Authority (FCA) wrote to 20 of the biggest advice firms requesting information about their ongoing advice fees.
This was done amid concerns that a significant number of clients had been paying for services, or annual reviews, they hadn’t received.
Few bore the brunt of this more than St James’s Place (SJP).
The UK’s largest advice firm announced it was putting by £426m to cover any future compensation claims.
Barely a week went by without a new announcement for us to get our heads around and report on
This – and the negative press coverage that followed – caused the company’s share price to plummet and saw the wealth manager drop out of the FTSE 100.
Quilter also said at the time that it may result in the company incurring some “remedial costs”.
But it affected more than just Quilter and SJP.
By March, the FCA had found 231 firms that charged for ongoing advice that hadn’t been delivered – with over 6,000 clients impacted.
This busy start to the year was a sign of things to come.
The following month (March), saw the FCA publish its thematic review of retirement income advice, which found that some firms may not be meeting the needs of their customers, potentially leading to poor outcomes.
Then, in May, Rishi Sunak dropped a bombshell by calling an earlier-than-expected general election, for 4 July.
During their election campaign, Labour vowed to “unashamedly champion” the UK’s financial-services sector as “one of our greatest assets” if it returned to power.
One of the ways it proposed to do so was by streamlining the FCA’s 10,000-page handbook.
After a tidal wave washed the Conservatives away as the country voted for change, Sir Keir Starmer and co wasted no time in executing that plan.
Within 15 days of the election, the FCA announced proposals to reduce the regulatory burden on financial services firms.
The regulator called on those across the profession “to identify rules which could be removed or simplified if they overlap with the Consumer Duty”.
The FCA said reducing complexity of its rulebook could lower costs for firms, encourage innovation and help support the risk appetite needed to support growth.
In July, the regulator announced it would launch a clampdown on financial influencers better known as ‘finfluencers’.
The city watchdog added that it had been monitoring finfluencers’ online activities and found that the majority promote products to their followers without risk warnings.
By March, the FCA had found 231 firms that charged for ongoing advice that hadn’t been delivered
The crackdown, it said, would deter them from promoting financial products that harm consumers.
Then, in October, the regulator announced a review of consolidation after a flurry of M&A activity over the previous two years.
It said that, while industry consolidation can provide benefits, various types of harm can occur where this is not done in a “prudent manner” with effective controls.
“Where we receive notifications from individuals or firms to acquire or increase control in regulated firms, we will assess and challenge their suitability and the financial soundness of the acquisition,” it warned.
“Where acquisitions complete without prior regulatory approval, we may use our enforcement powers to object to the transaction or initiate criminal proceedings.”
We thought that maybe, just maybe, November would bring about a sense of calm as people slowly started to wind down before the Christmas break.
How wrong we were.
First, Rachel Reeves used her maiden Mansion House speech to announce a package of reforms aimed at driving competition across financial services.
During the speech, Reeves argued that regulatory changes have “gone too far” since the 2008 economic crisis.
Reeves added that in places, these changes have had “unintended consequences which we must now address”.
We thought that maybe, just maybe, November would bring about a sense of calm. How wrong we were
She described the financial services sector as “the crown jewel in our economy”, but added that “we cannot take the UK’s status as a global financial centre for granted”.
In addition, the chancellor sent “growth-focused remit letters” to the FCA, Prudential Regulation Committee, Financial Policy Committee and Payment Systems Regulator to push for a greater focus on growth.
Reeves also committed to publishing the first ever Financial Services Growth and Competitiveness Strategy next spring.
On the same day as the Mansion House speech, the FCA outlined the next steps of its eagerly-awaited Advice Guidance Boundary Review.
It confirmed it will be focusing on targeted support for pension savers first, with plans to decide on rules for better support for consumers in retail investments and pensions next year.
The message from the regulator heading into 2025 couldn’t be clearer. Whether you’re a consolidator, a finfluencer or an adviser, they’ll be watching you.
Dan Cooper is news editor at Money Marketing
No they’re not [watching]. Despite claiming to be “keen to encourage whistle blows” (a regularly repeated lie) “they” don’t even shift their backsides to go after bad actors when information on their activities is in the public domain. Nicky Morgan challenged Andrew Bailey on this very point when attempting to hold his feet to the fire over the Woodford debacle. And look what happened to her. And Rathi’s no better ~ consider WealthTek.
Like all similar communications, Reeves’ “growth-focused remit letter” to the FCA will be slung in a cupboard and ignored. Attempts to challenge the FCA at a later date as to why it’s not acted on that letter will be met with something along the lines of Yeah, well, we’ve been busy with other stuff, too busy to bother with the sort of guff that you pump out. And that will be the end of it.