Davy warns of 'year of regulation' Davy warns of 'year of regulation'

04 Jan 2018

SimplyBiz founder and chairman Ken Davy has warned 2018 will be the year when advisers are hit by more rules and regulations than ever before.

implyBiz founder and chairman Ken Davy has warned 2018 will be the year when advisers are hit by more rules and regulations than ever before.

Mr Davy pointed to a raft of new regulations that will enter the financial services market next year, including the Markets in Financial Instruments Directive II (MIFID II) which is introduced today (3 January) and the Senior Managers and Certification Regime (SM&CR),  on which the FCA has indicated it will publish a policy statement with final rules in summer 2018.

The industry will also be hit by the General Data Protection Regulation (GDPR) which comes into force on 25 May 2018, and the Insurance Distribution Directive (IDD), expected to apply from 1 October 2018.

Mr Davy said: “This year is probably going to see more new rules and regulations hit the financial services sector than in any previous year and an even uglier reality is that they are arriving in a raft of different forms.

“It is crystal clear that, unless you want to spend countless hours of your own time on mind-numbing detail, when you could, and should, be helping clients, you need to make sure that in 2018 you retain a reliable and comprehensive support provider.”

MiFID is a European directive that will affect asset managers and providers but also advisers.

Most notably it will introduce the requirement on advisers to record all relevant conversations with clients, either by taping or making written notes.

The rules also require distributors, including advisers, to pass information to providers to ensure investment products are being sold only to specifically targeted markets.

A study carried out in February found almost half of advisers expected Mifid II to have a negative impact on the financial advice industry and the majority believed it would lead to an increase in restricted advice.

The senior manager regime is an extension of the system currently governing banks. 

Under the regime, anyone who holds a senior management function at an advice firm will need to be approved by the FCA and every senior manager will need to fill out a statement explaining what they are responsible for, for which they will then be held accountable.

This will need to be approved by the FCA when it is first filled out as well as when changes are made to it.

The regime sets out a series of “prescribed responsibilities” which firms will need to give their senior managers, but these will not apply to some firms – including sole traders of firms – and larger firms will have more responsibilities.

Mr Davy also pointed to some positive changes in the coming year, including the promise of a better deal on the funding of the Financial Services Compensation Scheme (FSCS).

The regulator has been consulting on how best to reform the funding mechanism, which currently sees advice firms bear the brunt of the cost.

It proposed to make providers contribute from the first pound but only up to 25 per cent of the compensation costs which fall on the intermediation classes.

Mr Davy said providers should take the lion’s share of the cost. In his response to the FSCS funding consultation he wrote providers should pay as much as 75 per cent.

He has now reiterated his call. “Unfortunately, their suggestion that providers contribute a mere 25 per cent of the FSCS costs is wholly inadequate, given the providers’ ability to spot wrongdoing at a very early stage,” he said.

He added: “Critically, the consultation closes on 30 January and I urge you to take this opportunity to make your voice heard by submitting a response to ensure that after decades of injustice 2018 sees the introduction of a fairer deal for advisers.”

All in all Mr Davy was positive about the near future of the advice market.

“Throughout 2017, and regardless of elections, Brexit and pension freedoms, regulation has continued its remorseless march adding costs and complication into a marketplace, where financial advisers simply want to focus their energies and expertise on helping clients meet the challenges of dying too soon or living too long,” he said.

“The good news is that despite everything the world has thrown at them, most financial advisers are ending the year busier and more successful than ever and can look forward to a positive future in a market brimming with opportunities.”


"Having joined SimplyBiz last August, you may or may not remember that I nearly did an 'about turn' before leaving the network I was with. It was after a conversation by phone with you (Ken Davy), that I decided to join and to be totally frank, it was the best move I have made. Thanks for that."

Doug Ryder

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