The Financial Conduct Authority’s (FCA) current thematic review into due diligence practices is this month scrutinising how advisers assess products and services and what barriers they may be facing in the process.
The FCA – an independent UK body that regulates the conduct of over 50,000 businesses – is currently looking into advisory firms who engage, from a series of different angles, both restricted and independent, and will cover outsourcing.
A key part of the authority’s review into Duty of Care last year argued advisors must demonstrate – even within focused advice – ‘a duty to use reasonable skill, care and diligence’ whenever they provide advice.
Experts suggest this guidance will lead to a comprehensive increase in financial services companies vetting third-party supplier company records more closely, to demonstrate to regulators that they know exactly what the risks of doing business with them is, and how those risk factors could consequently affect their clients.
Simplified advice services or tools commissioned by financial advisors must also be thoroughly examined by advisors before being offered to their clients, with the onus of responsibility for comprehensive due diligence now falling completely on the advisor or advisory firm.
BIIA Comment: It can be assumed that next in line will be the reliability, accuracy and timeliness of data used in decision making. It is already a part of China’s credit information regulations.