Insights from the FCA’s “Dear CEO” letter of October 7, 2024: What advisers need to know

The Financial Conduct Authority (FCA) continues to stress the importance of firms prioritizing consumer needs and delivering good outcomes. In its October 7, 2024, "Dear CEO" letter, the FCA outlined key areas of focus for financial advisers and investment intermediaries, laying out just how they should align with these new high standards.

So, what does the FCA want, exactly? Simple: reduced risk, clear and continuous compliance, and support for everyone’s dreams of financial freedom. Easy, right? Well, with the right tools, it could be.

FCA’s expectations under Consumer Duty

1. Reducing and preventing serious harm, in other words, don’t let clients sleepwalk into financial traps, especially when it comes to retirement income and ongoing advice services.
2. Keep up the compliance, meaning that continuous evidence of compliance with Consumer Duty is required (so no “set it and forget it” strategies here).
3. Enabling more consumers to pursue their financial goals through structured support and tailored advice. This isn’t just about wealth building; it’s about helping clients achieve meaningful financial goals, whatever they may be.

Financial advisers are urged to have a game plan and data to back it up, but the “how” is left to them. As noted in the FCA’s guidance, there’s no one-size-fits-all approach, making it essential for advisory firms to identify effective, customized solutions that align with these objectives. It is important to address these expectations in cost-effective scalable way while ensuring high quality levels. 

Financial planning tools: the adviser’s new best friend 

The FCA sees financial planning tools as a golden ticket to better client outcomes. These tools allow advisers to present a clear projection of a client’s financial outlook, incorporating variables such as income, expenses, investments, and potential risks. Through effective financial planning, firms can demonstrate adherence to Consumer Duty, while simultaneously fostering a transparent and trust-based relationship with clients.

Benefits of financial planning tools: 

• Spotting gaps and risks: A holistic goal-based financial planning approach focussing on delivering good outcomes for the clients’ personal needs, instead of return. It ensures that the combination of investment-, cashflow-, tax-, retirement-planning, etc, all together best contribute to good outcomes. Cashflow forecasting allows advisers to uncover gaps in financial plans and proactively suggest solutions. This aligns with the FCA’s mandate to reduce risks and prevent harm.
• Visualizing financial futures: A significant strength of financial planning is its visual representation. Complex data can be illustrated through easy-to-understand graphs, enabling clients to grasp the long-term impact of their financial decisions.
• Supporting informed investment decisions: By offering dynamic simulations, advisers can help clients anticipate the impact of various market conditions or life events on a plan’s feasibility, supporting good outcomes and increasing client confidence. 

Demonstrating compliance through comprehensive planning 

One of the core pillars of the FCA’s Consumer Duty initiative is ensuring that firms can demonstrate how they are delivering good outcomes. This involves documenting advice and showing that client needs are consistently prioritized. Financial planning tools can serve as a vital record-keeping mechanism, reinforcing that the advice given is both appropriate and beneficial. 

As the FCA pointed out, delivering ongoing advice services must be relevant and of fair value to clients. A key takeaway from the October letter is that 90% of new clients are enrolled in ongoing advice arrangements, with ongoing fees comprising a significant portion of firm revenues. This data highlights the importance of providing transparency and proof of value in these arrangements. 

A path forward for advisers 

In conclusion, the FCA’s October 2024 "Dear CEO" letter is a nudge to advisers to step up their game and reinforces the need for a proactive and client-focused approach to financial advice. Financial planning tools offer an efficient and transparent way to address the FCA’s requirements, aligning financial advisers with the expectations set out under Consumer Duty. These tools not only help firms stay compliant but also play a transformative role in enhancing the client-adviser relationship, ensuring that clients can confidently navigate their financial journeys. 

With the right tools, advisers can guide clients through their financial journeys with clarity and assurance, proving that the best outcomes aren’t just numbers on a spreadsheet—they’re about peace of mind and future security. This proactive, technology-driven approach strengthens the trust between advisers and clients, aligning both parties towards achieving good consumer outcomes—ultimately a goal that lies at the heart of both the FCA’s mission and the future of financial advice. 

How can Ortec Finance help?

OPAL Financial Planning can be used to bring your clients’ financial plans to life in a cost-effective, efficient way helping them understand the risks they face now and in the future. Not using OPAL yet? Book a free, no-obligation demo with a business consultant to explore its full capabilities. 

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