Assessing Suitability Review… cancelled!
In the last 18 months, everyone has had their priorities lists turned upside down and a lot of that previously ‘top of the list’ important work, soon hit the back burner. The regulator is no different. They had previously announced in their 19/20 business plan, their intentions to launch their second suitability review, looking specifically at retirement income advice. In April 2020 this work hit a pause, and just last week the regulator announced that they were abandoning the review entirely.
The review was supposed to be a natural progression to the regulators assessing suitability review, 2017. As a reminder, this initial suitability review threw up some interesting statistics for the industry. Just over 93% of advice in the sample was deemed to be suitable, but only 53% (just under) advice has the correct disclosure. We have been working closely with firms off the back of this review to help them look at their suitability and disclosure processes to ensure they are operating exactly in line with how the regulator would expect them to be. Firms have actively engaged with us in this work, and we are very happy to see how much of the feedback firms have taken onboard.
The second suitability review made total sense, it was an appraisal of the initial work done by the regulator focusing specifically on one area of advice where they felt risks could materialise and we were actively working and preparing firms for this. In reality, those firms who had engaged with the initial suitability assessment feedback, had little to do in terms of the second suitability review as all of those ‘best practices’ have been well and truly implemented and embedded in firms and their culture.
The regulator addressed “that they are still committed to ensuring firms give suitable advice” but the global pandemic has required them to redirect resources where risks have grown and accelerated. Whilst the review is cancelled, the regulator is still focusing their eyes in a similar arena. Their main target will be, none other than, defined benefit transfer work. We have already seen the launch of their past business review into 60 firms, and with particular attention to the 36 firms involved in the British Steel pension business.
We expect that whilst in theory, the regulator says the suitability review 2 is a closed book, it is unlikely that they will drop this entirely. It is likely that they will assess similar parameters, but looking at it from a different angle, perhaps Consumer Duty? Consumer Duty reworks some of the original rules around Treating Customers Fairly, making the firm clearly responsible for client outcomes looking specifically at; Communications, Products and services, customers serviced and price and value. Now if we tie this back to assessing suitability review 1 looking at suitability and disclosure, there is a clear link between the work in this review, and the proposed outcomes of Consumer Duty.
What does this mean? Well in our humble opinion, it is that firms cannot rest on their laurels and should continue to focus advice on positive client outcomes from the advice that is being provided (positive now and in the future) v’s making recommendations that a client doesn’t see any real benefit from for 20 years, which if the case, the advice could and probably should be provided in 20 years time! We will keep you updated on how this pans out and if the Assessing Suitability Review pt2 morphs into something else and grows legs and arms.