When you’re working with a financial adviser, you will want to be confident they are a financially robust firm.
All authorised and regulated financial adviser firms in the UK are required to be solvent and hold a minimum level of ‘capital adequacy’.
Our regulator, the Financial Conduct Authority (FCA) monitors this capital adequacy in a number of ways, including a twice yearly set of regulatory reporting.
This morning I have completed our Retail Mediation Activities Return (RMAR).
As a firm, we have to report twice a year; following our company year end on 31st July and an interim report at the end of January.
This regulatory reporting covers a range of questions, mostly focusing on the financial aspects of our business.
The deadlines involved mean our accountant has to quickly prepare a final set of accounts, as the figures we report to the FCA need to match precisely those provided to Companies House, despite having much longer to make accounting adjustments for the latter.
We also report details of our Professional Indemnity insurance, any client complaints we have received during the period (thankfully a nil return) and our typical charging structure.
This is all data which, I’m sure, the FCA runs through their systems and uses to identify any potential problems, hopefully acting before there is a risk of consumer detriment.
In addition to this regulatory reporting to check capital adequacy and PI insurance is in place, consumers are protected when dealing with their financial adviser by the presence of the Financial Services Compensation Scheme (FSCS).
This compensation scheme is funded by the financial services sector, with firms such as ours paying a substantial levy (tens of thousands of pounds each year) into a central fund to compensate the victims of failed firms.
We often express our dissatisfaction with the unfair nature of FSCS funding, despite its importance for consumer protection, because it means the polluter doesn’t (usually) pay for its misdemeanors.
It was particularly upsetting to see today, as I was submitting our regulatory return and reporting figures on which they calculate our regulatory fees for next year, that the FSCS is embarking on a £3.3m consumer awareness campaign.
This national advertising campaign features five celebrities, including Fearne Cotton.
Of course it’s easy to spend money when it belongs to other people, so no doubt this £3.3m will simply be tacked onto our regulatory fees next year, along with paying for the failure of advisers who should have maintained capital adequacy and had valid PI insurance in place.
Regulatory reporting acts as an important check and measure for regulated firms.
It unfortunately exists within a regulatory system where the combination of capital adequacy and Professional Indemnity insurance is not doing enough to hold back the tide of claims against the celebrity-endorsed Financial Services Compensation Scheme.
