We are aware that some authorised firms are considering using consolidator business models as their eventual exit route from the industry. Typically the consolidator firm will put the adviser firm’s customers onto a wrap platform for ongoing servicing and the client bank at a later date.

This appears to be a growing trend in the financial adviser market in particular. A number of these consolidators are not regulated firms, so they aren’t regulated or supervised by the FSA.

We would like to remind firms they must continue to act, honestly, fairly and professionally in line with the client’s best interests.  While there could be consumer benefits from an adviser looking at dormant client accounts more regularly there are also issues firms must consider  in order to ensure the fair treatment of consumers.

Where firms are advising customers they need to ensure the new solution is suitable for each individual customer.

Any additional costs to the customer need to be suitable for the individual customer’s needs and circumstances. It is not enough to disclose these and agree them with the clients before the transfer. 

Taking the consolidator route

If you are considering the consolidator route or you have already taken it you must retain full responsibility for complying with all your regulatory obligations and responsibility.

• You will need to demonstrate that you are continuing to treat customers fairly.
• You will also have additional responsibilities including those to manage potential conflicts of interest brought about by a consolidator’s business model.
• Disclosing a conflict of interest is not enough, you must have appropriate systems and controls in place to identify and mitigate the risks arising from such conflicts. This includes transparency over any inducements to advisers to recommend particular products.

Many consolidators claim their business models will save adviser time, maximise revenue streams from client investments and allow firms to concentrate their efforts on financial planning rather than fund selection. This added value to the IFA should not be to the disadvantage of the customer.  

More information

Using platforms factsheet