FCA takes action over advice firms' due diligence failings

The FCA has also instructed three firms to make improvements in their research and due diligence process and have asked them to make an attestation that they have done so, signed by a senior individual.

In the review, the FCA said it was clear that firms of all sizes and type were able to get research and due diligence right if they had the right approach and were putting the interests of their clients at the heart of their business.

It suggested that in firms where this culture is weak there could be a bias towards the status quo, with firms not questioning why they continued to recommend certain products and services.

The regulator added that firms need to ensure they are adequately managing conflicts between their clients’ and their own interests. For example, in some cases the review found the service that the firms received from a platform was considered more important than the service received by the client.

In addition, some firms were no longer reviewing platform options available for clients because the firms were content with the service they received from their existing platform provider. The FCA said the findings were 'disappointing' as it has previously published its expectations on this topic.

Linda Woodall, director of life insurance and financial advice at the FCA, said:

“Research and due diligence is one of the three pillars of getting advice right, which is why we have returned to this issue. Firms clearly want to get this right and all firms, regardless of size or type, can carry out good research and due diligence.

“However, there are still improvements firms need to make and we’d encourage all firms to look at our findings and ensure that they are challenging themselves to ensure they’re delivering quality due diligence for their clients.”