EMEA Centre for Regulatory Strategy in Financial Services UK
Key considerations for Wealth Managers : A response to the FCA’s Dear CEO Letter
On 13 June 2019, the FCA addressed a Dear CEO letter to Wealth Management and Stockbroking firms setting out its view of the key risks of harm that firms could pose to their customers or the markets in which they operate.
The FCA outlined four key ways in which customer harm could occur in this sector:
- By having reduced levels of savings and investments due to fraud, investment scams and inadequate client money, or assets controls;
- By losing confidence in the industry’s ability to deliver their financial objectives due to mismanagement of conflicts of interest and market abuse;
- Through reduced levels of savings and investments due to order handling procedures and execution processes that do not deliver best outcomes; and
- By being unable to understand the costs of services provided by firms, due to insufficient or inaccurate disclosure of costs and charges.
The FCA will expect all firms to consider how their activities could crystallise these risks and how best to mitigate them.
In response to these risks, the FCA set out its Wealth Management and Stockbroking supervision strategy. This is built upon the FCA’s approach to supervision strategy publication, which highlights how it will identify, prevent, reduce or correct potential and actual harm.
In this blog, we explore the key considerations for firms under each area of the FCA’s supervision strategy.
Fair Pricing: central now to the FCA’s assessment of firms and financial markets
The FCA is increasingly scrutinising whether the pricing practices used by individual firms, or present across particular financial markets, are fair to consumers. We have written previously about the FCA’s increasing scrutiny of cross-subsidisation and price discrimination, both pricing practices that the FCA has concluded can cause harm to consumers. The FCA has now published its Feedback Statement on Fair Pricing (FS19/04), following on from a Discussion Paper it published on the same topic last year.
FCA clarifies its expectations on the treatment of vulnerable customers
Since the publication of its original paper on consumer vulnerability in 2015, the FCA has strengthened its approach to consumer vulnerability. The FCA considers that half of the UK population displays characteristics of potential vulnerability based on its definition. The protection of vulnerable customers - already a core FCA priority - has now been thoroughly embedded into its programme of thematic work and day-to-day supervision. Through its recent Guidance Consultation 19/3, the FCA seeks to provide greater clarity for firms regarding its expectations as to the fair treatment of vulnerable customers and practical guidance on translating those expectations into action.
Crucially, the FCA expects firms to embed the fair treatment of vulnerable customers into their culture at all levels and has made explicit its intention to hold firms to account where they are judged not to be doing enough to meet the expectations set out in the Guidance.
ICS 2019 Field Testing: shedding light on the Solvency II risk margin
As the IAIS kicks off1 the final year of field testing before it adopts the Insurance Capital Standard (ICS) at its Annual Conference in November 2019, comparisons with the experience of Solvency II inevitably arise: the IAIS is tackling many of the same policy issues that have already been faced by Solvency II, given both regimes target “market consistency”.2
ICS 2019 Field Testing: shedding light on Solvency II long term discounting
The IAIS has recently kicked off1 the final year of field testing of its Insurance Capital Standard (ICS), which it is scheduled to adopt at its Annual Conference in November 2019. This blog is part of a two-part series examining the calculation of market-consistent technical reserves in the ICS, which is one of the most important points of valuation methodology for a market-consistent regime.2 In doing so, it draws comparisons with the experience of Solvency II. As it develops the ICS, the IAIS is tackling many of the same policy issues that have already been faced by Solvency II, and how it approaches these issues could prove to be important in the context of the 2020 Solvency II review.
MiFID II 18 months on – what is under the supervisory spotlight?
It has now been almost a year and a half since MiFID II, the cornerstone of European capital markets legislation, became applicable. In this time, where have EU national competent authorities (NCAs) focused their supervisory activity, and what are they planning to look at next? To answer these questions, we surveyed Deloitte subject matter experts across 16 EU Member States on MiFID II supervision undertaken by the NCAs in their jurisdictions1. This was a follow up to a similar survey we undertook last September. It is important to note that the survey has been completed on a best endeavours basis, and may not be exhaustive of all supervisory activity.
Piercing the veil: what will a shift towards greater transparency on Pillar 2 mean for Eurozone banks?
Since he became Chair of the Single Supervisory Mechanism (SSM) in January, Andrea Enria has made clear his desire for greater transparency around the supervision of SSM banks. An important aspect of this concerns the approach to setting the Pillar 2 capital Requirement (P2R) and Guidance (P2G) as part of the Supervisory Review and Evaluation Process (SREP).
The future of finance | Insights into tomorrow’s financial system
Financial services continue to go through major disruptive changes that are redefining their role and structure.
Recognising this, the Bank of England (BoE) launched an initiative on the “Future of finance”1. The themes tackled include: infrastructure, ageing population, technology, low carbon economy and emerging markets. This initiative will set out a vision for the future of the financial system and inform the BoE’s thinking on future policies and capabilities.
These themes already pervade the strategic challenges Deloitte helps financial services firms to solve. Ahead of the publication of the conclusions of the BoE’s initiative, we brought together experts2 from across our UK firm to help us consider the current focus in financial services and what the future will look like. For the purposes of this note, we have only presented the most important focus against each theme.
The future of finance | Insights into tomorrow’s financial system
Financial services continue to go through major disruptive changes that are redefining their role and structure.
Recognising this, the Bank of England (BoE) launched an initiative on the “Future of finance”1. The themes tackled include: infrastructure, ageing population, technology, low carbon economy and emerging markets. This initiative will set out a vision for the future of the financial system and inform the BoE’s thinking on future policies and capabilities.
These themes already pervade the strategic challenges Deloitte helps financial services firms to solve. Ahead of the publication of the conclusions of the BoE’s initiative, we brought together experts2 from across our UK firm to help us consider the current focus in financial services and what the future will look like. For the purposes of this note, we have only presented the most important focus against each theme.
Rise of the alternative workforce: The pricing innovation imperative for insurers
The traditional employer-employee relationship is being replaced by the emergence of an alternative workforce – temporary, on-call contract workers, freelancers, independent contractors and gig workers – that leaves no generation untouched. The alternative workforce is expected (according to governments and organisations such as the World Economic Forum) to increase dramatically over the coming years due to a combination of factors, including firms’ cost pressures, technological adoption, and changing workplace cultures.