Regulatory advice framework

When must Key Features/KID/KIID documents be provided

• Produced for each packaged product

• Given to every retail client before application form is completed (new sales only)

What must Key Features/KID/KIID documents contain

• Nature of investment

• Aims of investment

• Risk factors

• Performance information

• Charges and terms

• Cancellation/withdrawal rights

• Compensation arrangements

• Complaints procedures

• Solvency II information (where appropriate)

What information must be provided under the Solvency II Directive for life policies

• Name and address of insurer

• Solvency and financial information

• Benefits and options

• Policy term

• Means of termination

• Premium payment details/duration

• Bonus calculation/distribution

• Surrender and paid-up values/guaranteed?

• Premiums

• Unit linking details

• Cancellation rights

• Tax arrangements

• Complaints arrangements

• Applicable law

KID/KIID changes

• subject to UK law not European reg

• use of KIIDs for UCITS extended to Dec 2026

PRIIPs KIDs

• No longer require performance scenarios

• Past performance information still required/being reviewed by FCA

• VCTs must have minimum risk score of 6 out of 7

What rules apply to projections

• Based on reasonable simulations and assumptions

• Supported by objective data

• Must contain risk warning (examples only, not reliable indicators of future performance)

What rules apply to pure protection policies (long-term insurance)

• Solvency II information must be provided

• Records retained for 6 years

What governs With Profits business

• Principles and Practices of Financial Management (PPFM)

• Explains how With Profits business is managed

What is financial guidance

Helping consumers make informed choices through:

• Provider guidance (specific products)

• Generic guidance (general information)

What does Money and Pensions Service have a statutory duty to do

Develop strategy for

• Financial capability

• Financial education

• Debt

What is MoneyHelper

• Consumer-facing brand of MaPS

• Replaced Money Advice Service and Pensions Advisory Service

What are the five core functions of MoneyHelper

• Pension guidance

• Debt advice

• Money guidance

• Consumer Protection

• Strategy

What is Pension Wise

• Free impartial guidance service for pension holders age 50+

• Online/phone/face to face

• advice on what to do, pension types how they work, tax

What are the six Fair Treatment of Customers (FTC) outcomes

• FTC central to culture

• Products meet customer needs

• Clear information provided

• Suitable advice given

• Products perform as expected

• No unreasonable post-sale barriers

What must firms do regarding FTC

• Deliver the six outcomes and record evidence

• Use MI and press coverage

• Overcome barriers to financial inclusion

What are the three pillars of Consumer Duty

• Consumer Principle

• Overarching ross-cutting rules

• Four outcomes

What is the Consumer Principle

Principle 12 - A firm must act to deliver good outcomes for retail customers.

• replaces 6 and 7

• new individual conduct rule 6 - deliver good outcomes for retail customers

What are the Consumer Duty cross-cutting rules

• Act in good faith

• Avoid foreseeable harm

• Support customers in achieving financial objectives

What are the four Consumer Duty outcomes

• Products & services - meet target market needs

• Price & value - fair value

• Customer understanding - informed decisions

• Customer support - no undue hindrance

What are the Adviser Charging rules

• Clear charging structure with charges disclosed

• FCA does not set charges

• Ongoing charges require ongoing service

• Fees disclosed in monetary terms

• Facilitation permitted

• Must provide fair value (price and value)

What are stakeholder products

• Short-term product - cash deposit account

• Medium term investment product - collective or life fund

• Long term pension product - life-styled version of existing stakeholder pension

What rules apply to stakeholder/basic advice

• Explain stakeholder recommendation

• Initial disclosure required and explain remuneration

• Full fact-find not required

• Product only needs to be suitable not most suitable

• Maximum charge - 1.5% first 10 years, 1% thereafter

What is the overriding rule for financial promotions

Communications must be fair, clear and not misleading

What are the requirements for non-real-time financial promotions

• Compliance approval

• Record retention - 6y (life/pensions), 5y (MiFID), 3y (non-MiFID) INDEFINITELY for transfers/opt out

• Name of firm and address

• Past performance and state it’s not a guide

• Tax references

Rules aimed at advertisements do not include

• Specific communication/product to specific recipient

• Personal illustrations

What are the requirements for real-time financial promotions

• State purpose

• Identify themselves and firm

• Check agreement to proceed

• Provide contact details

• Avoid unsociable hours

What are the rules on direct offers

• Enough information for informed decision

• Packaged products must contain info from key-features rules

What are the rules on cold calling

Only if established client relationship exists

What are the E-Commerce Directive requirements

• Firm details easily, directly, permanently available

• Clear info on services provided

• Ordering instructions clear

• Input errors can be corrected

• Orders acknowledged

• Conduct of Business rules still apply

What are Know Your Customer (KYC) requirements

• Collect sufficient personal and financial information

• Use fact-find

• Record client left out information

• Keep fact-find copies for review/complaint

• Revise and update at all future meetings

What are the suitability rules

• Provider firm must not recommend unless it has suitable product in range

• Multi-tied should not give advice unless suitable product in range

When is a suitability report required

• Collective investments

• ISAs

• Insurance-based investments

• Personal/stakeholder pensions

• Pension withdrawals

• UFPLS

• Pension opt-outs/conversions

• Short-term annuities

• Life policy recommendations

What must a suitability report contain

• Why suitable

• Disadvantages

• Main consequences

• Non-technical language

What pension scheme comparisons must be made when recommending pensions

For PP, SHP or FSAVC recommendations, explain why they are at least as suitable as:

• OPS

• GPP

• SHP

For PP recommendations, explain why they are at least as suitable as a SHP

When must a suitability report be issued

• Investment transaction: before transaction concluded

• Personal pension/stakeholder pension: within 14 days after contract concluded

• Pension transfer/conversion: before transaction effected

• Life contract: before contract concluded

• Other contracts: as soon as possible

What principles apply when assessing suitability of recommendations

• Advice must be based on client's interests

• Quantify each need and identify shortfalls

• List and compare suitable products

• Present recommendations so client understands them

What must be considered when reviewing existing investments

• Whether to surrender or retain

• Ethical issue: act in client's best interests

• Legal issue: cannot churn investments

What is the adviser's duty of care regarding recommendations

Ensure client understands any inherent risks in the recommendation

How should unsuitable transactions be handled

• Adviser may decline the transaction

• If proceeding, record details on fact-find and client must sign

What rules apply to application forms

• Client should complete own application form

• Failure to disclose a material fact could make contract void

• If adviser completes form, client should sign agreement confirming information is correct

• Form must be signed by client unless there is a Power of Appointment

What should advisers consider regarding a client's understanding of risk

• Ascertain client's understanding of risk

• Explain risk in terms the client understands

• Attitude to risk may change over time

• In-depth discusion

• Existing investments

• Communication clear, fair, not misleading

What are per se and elective professional clients/eligible counterparties

• Per se = automatically qualifies due to characteristics (e.g. local/public authority, authorised firm, government, central bank).

• Elective = client requests classification and firm assesses knowledge (quant test, also used for MiFID).

• Financial advisers rarely classify clients as eligible counterparties.

Rule for accepting business

Status of client must be established through reasonable steps

ICOBS rules

• Consumer - natural person acting outside trade/profession

• Commercial customer – customer who is not consumer

• Customer – refers to consumers and commercial customers

Fiduciary relationships

Adviser owes duty of care, confidentiality and primacy of client interest to client

What information must be included in status disclosure (initial disclosure)

• Name/address

• Method of communication

• Regulatory status

• AR status (if applicable)

• Independent/restricted status

• Service details

• How firm is paid

• Ownership/loan details

• Complaints procedure

• FSCS cover

• Conflicts of interest summary

When is written status disclosure not required

• Already provided and still valid

• Initial contact by phone (written later)

• Execution-only non-life packaged investment

What are the charging rules

• Must be disclosed

• Includes remuneration payable

• Proper value placed on benefits/services received

What is included in a client agreement (Terms of Business)

• Investment objectives

• Conflicts of interest

• Status

• Complaints

• Restrictions

When is client agreement (terms of business) not required

• Direct-offer promotions

• Life offices selling life and pensions as principal

How long do client agreement records need to be kept

• Longer of 5 years or client relationship

• Pension transfers/opt-outs/FSAVCs kept indefinitely

What are the best execution requirements

• Mainly for stocks and shares

• Take all sufficient steps to achieve best result

• Execute promptly

• Sellers → highest price

• Buyers → lowest price

What is execution-only business

• Client chooses investment with no advice given

• Adviser arranges transaction

• No fact-find or suitability assessment

• No access to FOS

What are limited advice and non-advised sales

• Advice on a specific subject only

OR

• No personal recommendation

• Client decides independently

How should insistent clients be handled

• Give suitable advice

• Explain risks

• Explain action is against advice

• Send second letter reiterating advice

• Only arrange after this is ignored

• Obtain written confirmation if proceeding

• Firm does not have to arrange transaction

What should firms consider regarding limitations and referrals

Recognise limits regarding:

• Own expertise

• Reliance on others

• Reliance on information

• Insufficient information

• Execution-only business

• Introducer organisations

Which products have 30-day cancellation rights

• Life policies

• Pension policies

• Pension transfers

• Varying PP/stakeholder by taking income

• Lifetime ISA (non-distance recommendation)

Which products have 14-day cancellation rights

• Cash ISA

• Units in regulated collectives

• CTF transfer

• ISA opening/transfer

• EIS

• Designated investments sold at a distance

What are the general rules for cancellation rights

• Start from conclusion of contract

• Life policies start when customer informed contract concluded

• Must be provided in writing

• Must explain cancellation process and timescales

• Pension transfers/annuities/income withdrawals have a pre-contract withdrawal right of at least 14 days

How are cancellation rights exercised

• Notice can be given by any acceptable method

• Posted notice counts from posting date

• Refunds paid less market losses where applicable

What are the record-keeping rules

• Indefinitely: pension transfers, opt-outs, FSAVCs

• 5 years: life, pensions, Lifetime ISA

• 3 years: others

What is a vulnerable client

• Poor health

• Life events

• Low financial resilience

• Low financial capability

• Age or circumstances

What must firms do for vulnerable clients

Firms must take positive action to create good outcomes and protect them from harm.

How should advisers deal with ethical, religious and sustainability preferences

• Recognise importance to clients

• Understand ESG4 labelling rules

• Identify preferences and ensure advice aligns with them

What are the requirements for ongoing reviews

• At least annually

• Update and review fact-find

• Record changes

• Some firms offer ongoing reviews; others only review on request

What tax-planning opportunities may trigger a review

End of tax year

• Use ISA allowance

• Use pension annual allowance

• Utilise CGT exemption

• Utilise IHT exemptions

Beginning of tax year

• Invest/reinvest into ISA

• Increase pension contributions

• Identify opportunities from tax changes

What other events may trigger a client review

• Marriage/divorce

• Birth of child

• Tax changes

• Product developments

• Economic developments

• Changing client needs

Good practice:

• Schedule reviews

• Send reminders/newsletters