Q. Am I allowed to hold colour photocopies on a client file for money laundering verification purposes?
Although the FSA nor the Joint Money Laundering Steering Group do not state in any of their guidance that colour photocopies are not allowed, it is the Serious Fraud Office which frown upon this activity since they fear that it would be easier for the documents to be copied and used in fraud. Therefore it is best practice not to hold colour photocopies on file.
Q. Am I allowed to advise clients based in North America?
It is not the FSA which do not allow advisers to advise North American clients since they would say that the adviser needs to be mindful of any requirements of the Regulator of that country. However it is often PI insurers which do not permit advising clients in North America. This is due to the unlimited damages that can be awarded if legal action is instigated in the USA. Best practice would be if you are in any doubt as to whether you can advise a client anywhere other than in the UK, particularly the USA, then refer to the firm’s PI insurer for guidance.
Q. What is considered to be ‘effective management information’?
‘Effective Management Information’ is information which the firm considers to be relevant when looking at the practices of the firm. The best way to view this is ‘What information does a business need to review on a regular basis in order to make sure it is solvent, conducting business and managing its staff?’ Suggestions of what constitutes management information would include the firm’s financial position including GABRIEL returns, KPI data, complaints received, customer feedback, minutes of management meetings/ adviser meetings.
Q. What permissions does the firm need to hold to advise on long term care contracts?
The firm does not need any additional permissions to advise and arrange long term care contracts apart from the regular permissions of advising and making arrangements towards investments etc. However before the adviser proceeds to provide recommendations in this area, they need to be competent to advise in this area i.e. hold the relevant qualifications such as CF8 and have relevant experience.
Q. I already hold the diploma status with the CII – do I need to take any further action in order to be at level 4 in the post RDR world?
Yes – the FSA have provided a template form to help assess what gaps in knowledge exist between the qualifications held and the mandatory areas of the RDR (i.e. investments, regulation, ethics and taxation). This gap analysis will need to be completed and structured CPD activity conducted to close the identified gaps. At the moment the gap analysis form can be found as an appendix to CP09/31 issued in December 2009.
Q. What do I need consider when buying an existing IFA firm?
When considering whether to buy an existing practice it is imperative that proper due diligence is conducted. This means conducting an audit on the firm reviewing any feedback from previous regulator visits/ monitoring, reviewing general practices, what information is held on the client files, complaints history, persistency history and feedback from any third party compliance support. You also need to consider the back offices used to establish how easy it may be to transfer data across and the type of client that the firm works with to see if there is any synergy with your target market. Also consider whether your firm will take over the liabilities of the firm or whether your contract will require run off PI cover – if so, how long for?
Q. When taking the agency over on a particular product for a client, am I responsible for the previous advice given?
When taking on a new client who holds an existing portfolio, you will not automatically be responsible for the previous advice given. However if you are taking a trial commission you will need to demonstrate why you are taking this fee for the policy. You will also be expected to assess whether the policy/ funds are still suitable for the client when you take the policy over. In the event of a complaint taking place, the primary responsibility will be with the first adviser although his liability will end when you take the policy over. You may then find yourself responsible for the payment of compensation from the date that you took the policy over unless you can demonstrate that you have reviewed the policy and assessed it to be suitable for the client in their circumstances at that time.
Q. What do I need to consider if I want to leave a network?
Leaving a network is not a decision to be taken lightly. The benefit of being a member of a network is that they are directly responsible and answerable to the FSA whereas as an appointed representative, you are classed as an exempt person. However if you are considering leaving a network you will need to consider the following:-
- FSA fees
- Professional Indemnity costs
- Half yearly regulatory reporting via GABRIEL
- Ongoing supervision and monitoring of work conducted by the advisers
- Responsibility for any reviews required by the regulator i.e. structured products, pension switching
- Being directly answerable to the FSA
- Paying for additional compliance support by a service company, consultant or inhouse support.
- The amount of notice you need to give the network?
- The overlap is FSA and FSA network fees
- Whether you need to send back client files to the network
The benefits of being FSA direct though include:-
- Being in control of your business
- The business is not constrained by restrictions applying to the lowest common denominator
- Flexibility
- The ability to liaise direct with the FSA.
Q. What type of pension transfer requires a pension specialist and the firm to have the relevant permissions?
Advisers are often aware that in order to conduct final salary pension transfers this must be conducted by a pension specialist adviser whose firm must have the relevant FSA permissions to conduct this type of business. If a firm does conduct an OPS transfer without the relevant permissions then this is a notifiable event to the FSA. However transfers away from Executive Pension Plans (EPPs), Small Self Administered Schemes (SSAS), Contracted Out Money Purchase Schemes, Contracted In Money Purchase schemes and AVCs also require a pension specialist to conduct the transfer even though the schemes act broadly the same as a regular pension. This is because they are still governed by HMRC rules despite pensions simplification in 2006. These types of schemes still may offer superior tax free cash and death benefits which need to be reviewed in depth before transferring to a regular scheme.
