The FSA's Retail Conduct Risk Outlook (RCRO), published today, sets out the highest priority retail conduct risks, grouped into 15 categories. These are the risks on which firms should (and the regulator intends to) focus with particular care through the period of transition of conduct regulation to the new Financial Conduct Authority (FCA).
Several issues identified in the 2011 RCRO - notably the development and marketing of structured deposits, the impact of UCITS IV on the ongoing quality of advice, and tax changes and their implications for financial products - are no longer considered risks with a high priority regulatory focus, although the FSA stresses that firms should still be concerned about the related risks.
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TOP 15 RETAIL CONDUCT RISK CATEGORIES 1. Aligning business models to fair treatment of consumers
2. Complexity in retail products and services
3. Firm's responses to regulatory and/or legislative change
4. General Insurance
5. Governance of funds in life offices
6. Host authorised corporate directors 7. Inadequate complaints handling
8. Investment propositions
9. Investment risk profiling 10. Investor compensation protection 11. Mortgages
12. Pensions and retirement planning
13. Product bundling
14. Projections 15. Systems and controls weaknesses in the network model |
In the process of making this assessment of risks, the FSA undertook qualitative research from consumers on their key concerns regarding their interaction with financial services providers. Those key concerns, which reflected a perceived erosion of trust between consumers and their financial service providers, included:
- Pressure selling
- Lack of ongoing service, focus on single transactions and new customers
- Poor complaints handling
- Ineffective time management (resolving issues, making transfers)
- Difficulties in switching, cancelling or altering instructions
- Failures in systems/human error and poor infrastructure
- Complexity and volume of communications
- Excessive or unfair charges
- Changing terms and conditions
Annex 2 of the 2012 RCRO helpfully maps the high priority risks to the following sectors, in the light of the key environmental trends for each sector:
- Retail banking [page101]
- Asset management - including private client management [page103]
- Insurance intermediary [page105]
- Retail intermediary [page107]
Firms should however note that these sectoral maps are not a comprehensive list of the lists relevant to each sector or to individual firms - the FSA expects firms to make their own determination as to the risks most relevant to their particular businesses, and to take action to monitor and control those risks.
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