CP26/10: Simplifying the pensions and investment advice rules

Read CP26/10 (PDF) [1]

We want consumers to be confident when making decisions and to see a market that offers a continuum of help, guidance and advice, so that people can find what’s right for them. 

With the targeted support rules now in place, our focus is on completing our outstanding policy work so that the market can develop and deliver a wide range of support for consumers. 

We are taking steps to simplify our advice rules to remove barriers to innovation and promote competition in the market, while maintaining consumer protection. 

Our proposals include:

• Consolidating the suitability requirements in COBS 9 and COBS 9A into one set of common rules and expectations.
• Clarifying the existing flexibility in our suitability rules to offer different advice services, and different recommendations to different clients, by replacing the rule requirement to consider ‘necessary’ information with an expectation that advisers consider ‘sufficient’ information when assessing suitability.
• Clarifying that firms do not always need to assess a customer’s knowledge and experience before making a recommendation, where the type of product the firm envisages recommending is one reasonably identified as having a target market that includes clients with no experience in investing.
• Introducing a single ‘attitude to risk’ concept in the rules, clarifying that firms do not need to use complex tools or detailed questionnaires to assess it, and confirming that firms can take a proportionate approach when determining a client’s ability to bear losses.
• Consolidating the timing and content requirements that currently apply to the provision of suitability reports for different types of businesses. 
• Retiring FG 17/8, embedding its principles of proportionality directly into Handbook rules, supported by updated case studies to illustrate how firms can take a proportionate approach when assessing suitability. 
• Replacing the annual suitability review with periodic reviews based on clients’ needs.
• Clarifying how firms support disengaged clients, underpinned by the Consumer Duty[2].
• Including a discussion about legacy trail commission arrangements to modernise the rules and to prevent potential consumer harm.

Who is this for

This consultation will be particularly relevant to financial advisers and to those who sell or distribute pensions and investments products. Interested parties include: 

• Financial advice firms 
• Retail banks and building societies 
• Life insurers and SIPP providers 
• Authorised fund managers
• Investment platforms
• Investment managers
• Wealth managers
• Venture Capital Trusts 
• Firms providing services such as model portfolio services
• Industry groups and trade bodies 
• Consumers 
• Consumer groups and organisations

Next steps 

This consultation has now closed. We will publish feedback on responses and issue a Policy Statement once we have reviewed your comments. 

Background

We are consulting on rule changes in response to feedback on:

• Supporting consumers’ pensions and investment decisions: proposals for targeted support (see chapter 9 of CP25/17[3]). 
• Review of FCA requirements following the introduction of the Consumer Duty[2] (see our call for input[4]).
• We are delivering on our commitment to review the existing rules relating to financial advisers' ongoing services, following on from our multi-firm work on ongoing financial advice services.