Advisers must offer porting of fact-finds, says FCA

Clients that move to a new adviser should be allowed to bring the results of their fact-finding with their previous adviser with them, a process known as ‘porting’ as the information becomes ‘portable’, the Financial Conduct Authority has said.

In a 48-page finalised guidance paper published today, the FCA announced the findings of its Financial Advice Market Review (FAMR) that is launched in August 2015.

It said that the probe into an individual’s circumstances as required both by the FCA’s Code of Business Sourcebook (COBS) and by the EU’s Markets in Financial Instruments Directive (MiFID), known as a fact-find, were “time consuming” and potentially costly.

The fact-find, said the FCA, “is often carried out face to face, so this can be a significant contributor to advisers’ costs,” adding that it had been advised “that any reduction in the length of the fact find process could reduce the overall cost of advice for the consumer”.

The fact-find, it pointed out, under its own regulations as well as under MiFID meant that “firms must collect all the necessary information about the client’s knowledge and experience, financial situation and investment objectives, to make suitable personal recommendations”, leading to the complexity of the process.

This led, said the FCA, to a potential lack of competition in the market in light of today’s consumer expectations in a digital age as “a lengthy or repeated fact find process is likely to be particularly unattractive to consumers who are used to more immediate online solutions”.

Porting, it said, had been made easier through the innovative use of technology, with a growing number of initiatives in the market already offering this “digital functionality”.

Such ease of porting would be “more convenient and cost-effective for the client and facilitate switching between advisers”, it said.

It pointed out that an additional benefit for consumers would be that they could use a central data storage to compare more easily opportunities across the market as “digital personal data solutions can integrate with financial firms operating online streamlined advisory services”.

There was no reason, in the FCA’s why a consumer’s personal repository of information could not be used, provided data protection rules were observed, it said, and with the client’s express permission, as the basis for a conventional advice consultation.

However, the firm would need to have suitable arrangements in place to confirm the accuracy of the data before it could be used, it said.

The client will be the winner’

Pat Connolly, pictured above, of Chase De Vere financial advisers, welcomed the clarification.

“It’s a sensible approach,” Connolly told International Investment, “because if you consider that the client has already paid for the advice in the fact-find, it’s clear that the data belongs to them, so it’s perfectly rational.”

“If it reduces the time-cost for a client, by definition it is clearly in a client’s best interests,” he pointed out.

He said that the move “will cut both ways — as well as clients taking out fact-find to another adviser, I’m sure we will find that client’s will bring previous fact-finds to us”.

The overall effect upon the market should be neutral, he said, meaning that “the winner here will be the client, which is, of course, as it should be.”




Eugene Costello
Eugene Costello has been a journalist for some 20 years, and has written for a wide variety of UK and international newspapers and magazines.

Read more from Eugene Costello

Close Window
View the Magazine

You need to fill all required fields!