FCA Consultations: Advice Reform, Fees, Incidents and Targeted Support

Unknown Speaker

Hello and welcome back to Beyond the Buzz!. I’m Vicky Pearce, and I’m here with Rachel MacRae. This week we’re looking at a pair of FCA consultations, starting with CP26 10 on simplifying the pensions and investment advice rules. And, honestly, “simplifying” is one of those words we all greet with cautious optimism, isn’t it?

Rachel MacRae

Very cautious optimism. But this one is worth a look. The FCA is proposing to bring COBS 9 and 9A together into a single suitability framework for pensions and investment advice. So the broad direction is consolidation, less fragmentation, and ideally a bit more confidence for firms trying to work out what good looks like.

Unknown Speaker

Yes, and the key theme running through it is proportionality. The FCA seems to be saying firms do not always need to gather absolutely everything plus the kitchen sink in every case. Instead, the focus is on collecting enough information to demonstrate suitability, based on the nature and scope of the advice actually being given.

Rachel MacRae

Which is quite important because it may help firms feel more able to offer limited-scope or simplified advice where that is appropriate, rather than defaulting to full holistic advice every single time. That’s really the practical shift here. Not less responsibility, but a more proportionate way of meeting it.

Unknown Speaker

Exactly. And linked to that, the FCA is also proposing changes to ongoing advice services. One of the more eye-catching points is moving away from a mandatory annual suitability review towards more flexible, periodic reviews. We found that a bit surprising, if I’m honest, given how much attention ongoing suitability has had from the FCA in recent years through supervision and multi-firm work.

Rachel MacRae

Same here, it did make me pause. But the FCA is pretty clear that this flexibility still sits within the Consumer Duty. So firms would still need to show their ongoing service continues to meet client needs and delivers fair value. we've had quite a few advisers excited by this as the initial impression was that the proposal was to get rid of this, however in reality you may get more room on review frequency, but not less accountability. Funny that.

Unknown Speaker

A regulator giving with one hand and expecting evidence with the other. There’s also clarification on charging for ongoing related services linked to an earlier personal recommendation. The FCA says firms can charge for those services, provided they deliver fair value and are clearly explained to clients, again in line with the Consumer Duty.

Rachel MacRae

And then there’s the paperwork point, which many people will quietly welcome. The FCA is consulting on making suitability reports shorter and more consumer-focused, with more emphasis on clear explanations and less on defensive drafting. So, ideally, documents that a client might actually read without losing the will to live. This might seem shocking to hear, but we often feedback to firms on the length of their reports - I think this needs another podcast in it's own right, but we have been saying for years you don't need to throw everything and the kitchen sink at them, just the core elements.

Unknown Speaker

Steady on, Rachel. Another notable point from the consultation was the proposal to retire FG17/8 on streamlined advice and replacing it with updated Handbook guidance and case studies to show how proportionality can work in practice.

Rachel MacRae

There are also discussion chapters rather than firm proposals on legacy trail commission and on the suitability standards that should apply to professional clients. So those areas are still at the early-views stage, but they clearly form part of the FCA’s wider ambition to modernise the advice framework

Unknown Speaker

And in terms of timing, responses to CP26 10 are open until the 22nd of May 2026. We certainly have some things to say, so if this affects your advice model, your ongoing service design, your reporting approach, or your charging structure, we encourage you to get involved and give your feedback. whilst these are only proposals at this stage, we would encourage firm's to review this one as there are some wide ranging changes that could impact report templates, advice processes and even the service levels you measure your outcomes on, so best to get thinking caps on now about how you can adapt rather than when the rules land and everyone suddenly becomes terribly busy.

Rachel MacRae

That’s chapter one in a nutshell: one combined framework, more proportionality, more flexibility on ongoing reviews, clearer rules on related service charging, and shorter suitability reports, with a few wider issues still being explored. Not exactly bedtime reading, but definitely a meaningful consultation... now if the FCA could also review the guidance on replacement business (which was last reviewed by the FSA in 2012) that would make my year!

Rachel MacRae

Moving on, CP26/11 covers the FCA’s proposed fees and levies for 2026/27. The headline number is an Annual Funding Requirement of £788.9 million, which is a 0.7% increase on last year. The ongoing regulatory activities budget goes up by 1%, which the FCA notes is below inflation and sits alongside its push on efficiency, including more use of technology and AI-enabled tools.

Unknown Speaker

For most firms, the practical points are fairly straightforward. Periodic fees, including minimum and flat-rate fees, are proposed to increase by 1%. The staged increases to the A.0 minimum fee finish this year, taking that minimum fee to £2,200. Application, transaction and notification fees are also proposed to rise by 1%.

Rachel MacRae

The Financial Ombudsman Service general levy is increasing in total as well, even though the Ombudsman’s overall budget is lower than in 2025/26. The impact on firms will vary by industry block and tariff data. The consultation also covers the usual other levies, including the Money and Pension service, devolved authorities’ debt advice levies and the illegal money lending levy.

Unknown Speaker

There are a couple of tidy ups to the Fees Manual too: the FCA makes clear that direct debit is its preferred payment method, and it wants to align cryptoasset application fees so firms pay only the highest applicable fee where they’re seeking multiple permissions. The consultation closes on the 30th of April 2026, and final outcomes are expected in July 2026 after Board approval.

Rachel MacRae

Now, guidance. FG26 3 sets out the FCA’s expectations on operational incident reporting. It defines an operational incident as an event, or linked events, that disrupt a firm’s operations in a way that affects service delivery to external end users or compromises the availability, integrity or confidentiality of their data.

Unknown Speaker

Firms are expected to assess incidents against reporting thresholds such as intolerable consumer harm, risks to safety and soundness, and impacts on market stability or confidence. The FCA also confirms a two-tier reporting approach: most firms submit a standard incident report, while certain firms, including banks, enhanced scope SMCR firms, CASS large firms and payment service providers, have enhanced phased reporting over the life of the incident.

Rachel MacRae

And importantly, an incident does not need to relate to an important business service to be reportable. Data breaches, third-party failures and incidents with reputational impact may still meet the threshold. Closely linked to that is FG26/4 on material third party reporting.

Unknown Speaker

Yes. That guidance covers both outsourcing and non-outsourcing relationships. The test is whether failure or disruption could cause intolerable harm to clients, risk the stability or integrity of the UK financial system, or seriously undermine the firm’s ability to meet its regulatory obligations. Firms in scope need to notify the FCA of new or significantly changed material third party arrangements early, and they need to maintain and submit an annual register using the standardised template.

Rachel MacRae

The FCA has also published good and poor practice examples on consumer segmentation for targeted support. The message is balance. Segments should be built around a shared financial need or objective, with relevant common characteristics, clear inclusion and exclusion criteria, and enough granularity to assess whether a ready-made suggestion is suitable, without drifting into a full advice fact-find.

Unknown Speaker

Firms should not ignore information they already hold if it suggests a ready-made suggestion may not be suitable, but they do not need a full individual suitability assessment or a review of all data held. The FCA also says reasonable, evidence-based assumptions can be used where they are not material to suitability. And it notes the Financial Ombudsman Service will take this publication into account when considering complaints in this area.

Rachel MacRae

Finally, the Complaints Commissioner has criticised the FCA over its approach to the British Steel Pension Scheme. In a final report published on 26 March, the Commissioner found the FCA failed to adequately protect former members from foreseeable harm during the DB transfer process, describing a series of regulatory failings before, during and after unsuitable advice was given. Around 7,700 members transferred out in 2017 following advice, and the FCA estimated that almost half of that advice was unsuitable.

Unknown Speaker

The FCA has pushed back, saying it does not agree it was behind the curve and that its actions should be judged on the information available at the time. It also pointed to about £106 million in redress for 1,870 former BSPS members, enforcement action against more than 20 firms and individuals, and closer collaboration with other bodies. So, plenty there to keep on the radar. Rachel, thanks as always.

Rachel MacRae

Thanks, Vicky. We’ll keep watching how these consultations and guidance pieces develop. Bye for now.

Unknown Speaker

Take care, everyone. Goodbye.