The regulator identified the five key issues it believed were mostly likely to result in consumer harm in the event of an economic downturn. These were, in no particular order, as follows:
- Collection practices by credit firms
- Creditworthiness
- Access to debt advice
- Permanent lower lifetime income
- Consumer exposure to inappropriate investment risk
- Consumers crystallising pension losses
The FCA has been increasingly clear in outlining its expectation that pension transfer and financial advice firms must offer clear, transparent, independent and suitable advice to consumers. This has resulted in an enhanced regulatory framework which has seen some smaller and less compliant firms forced out of the market.
The FCA proposed regulatory response to an economic downturn includes:
- the clear setting out of a communications plan for the fair treatment of consumers
- timely identification and robust action in respect of outlier firms
- co-operation with external organisations and policy-led initiatives to facilitate the FCA’s response
- ongoing analysis of downturn effects on consumers
- ongoing monitoring of and rapid intervention in the effects of a downturn facilitated by the creation of an oversight group
FCA anticipation of a recession
There is too much uncertainty currently afflicting the UK economic and political climates for any predictions to be made with confidence. However, what is known is that at the time FCA board convened, it had just been reported that the UK had experienced negative growth of -0.2 per cent in Q2, although later data showed this was followed by a period of growth.
What does this mean for financial advice clients?
For those who are already receiving independent financial advice, the FCA’s discussion of a downturn should not be seen as bad news as the body is doing the right thing in considering contingencies for a recession.
It is those who are proceeding without any concrete, long-term strategy in place who should worry. If a recession does occur, the only way to negotiate it with anything approaching confidence is to know that you have planned for volatility.
Financial advice for expats
At Blacktower Financial Management we believe that the last three risks identified by the FCA in the list above are interlinked. For example, if consumers crystallise pension losses they may be at risk of permanent lower lifetime income and, in seeking to take restorative action, may expose themselves to inappropriate investment risk.
Retirement planning, especially through periods of economic instability requires discipline and attention to numerous important factors. At Blacktower we can help you make sense of your wealth management and pension planning options.
We can help you plan and structure your strategy to create a diverse and beneficial asset allocation that makes the most of your cross-border situation while also providing long-term confidence regardless of short-term economic uncertainties. Contact your local Blacktower Financial Management office today for more information.
* https://www.fca.org.uk/publication/minutes/fca-board-23-and-24-october-2019.pdf Accessed 12-12-19
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