“Portfolio strategy letter for financial advisers” Dear CEO Letter

The regulator has published its latest Dear CEO letter, setting out the main concerns within our industry.

The FCA’s key themes were:

  • Treating Customer Fairly.
  • Vulnerable Customers.
  • Cost Disclosure.
  • DB and Pension Transfers.

Following a number of scandals and negative publicity over the last year, for many of us, these themes are not surprising. However, the FCA has also set out specific concerns in several key areas, listed below.

Assessing Suitability Review 2

Following the introduction of pension freedoms and several DB transfer scandals, the FCA is going to complete another review of the suitability of advice being given to clients.

In preparation for this, you may want to start reviewing the Initial and Ongoing Advice which your firm provides to clients. In particular, how do you ensure that the advice your advisers make is, and remains, the most suitable for clients? As demonstrated by the FCA’s recent review of the DB market, the regulator is increasingly concerned with how much customers pay for advice, as such, this is a good opportunity to review your costs and charges. Are they adequately disclosed to clients? Are the charges and recommendations the most suitable for the client?

Defined Benefit Pensions

Unsurprisingly, this area remains a continued area of focus for the regulator.

If you are involved in this area you must ensure that you are starting from the stance that a transfer will not be suitable for the client and that you have a formal triage process in place. You must also make sure that you are utilising a fair analysis of the market and that contingent charging is not being used.


Unfortunately, criminals are becoming more and more sophisticated in their approach. This has led to people losing their pension savings to scams. The FCA is focusing on this and how to prevent criminals from gaining access to consumers hard-earned pension pots through increasing their monitoring and promoting their Whistleblowing line.

To protect your clients you should review any delegation or outsourcing you have in place. You may also want to promote to your clients how to report potential scams or wrongdoing to the applicable authorities.


PII and capital adequacy remain a key concern for the regulator, in particular, the level of cover which a firm has. The FCA has identified several firms which have inadequate levels of cover in place, as such you should review your existing PII cover to ensure that you have cover for all current and historic business. Where appropriate you should also ensure that you have additional resources in place to meet your capital adequacy requirements.

The regulator has confirmed that where firms fail to meet their PII or capital adequacy requirements they will be taking action against the Senior Manager who was responsible for this.

From talking to many clients, we are aware that the time being taken by brokers and insurers to get terms is increasing, so don’t leave it until the last minute.


SM&CR went live in early December 2019 and for a majority of firms, people are still getting used to the new regime. We can expect that over the next year the FCA will conduct several reviews into SM&CR and how firms are implementing it. This will include how Senior Managers are being monitored and how Senior Managers are assessing and reviewing their certified staff.

If your firm has any appointed representatives, then at this time SM&CR does not apply and as such the APER requirements still apply.


The ubiquitous B’word, at the end of this month the UK will leave the EU. At the end of the year, all EU legislation will cease to apply to UK firms.

If you have not already done so you need to have in place plans to identify how Brexit will impact you and your firm. For example, do you at present have Passporting permissions? If so, how will you continue to complete cross border trades?

The FCA has asked that you review the above and consider it with your board and any other impacted parties.

If you need a hand or are unsure about how to address any of the above give us a call.

Tom Richmond – Technical Consultant