The Financial Conduct Authority (FCA) is proposing changes to the UK’s appointed representatives (AR) regime, in a move welcomed by AR network Movo Partnership.
In a 61-page consultation paper, the regulator noted: “We are proposing changes to the AR regime to reduce potential harm to consumers and markets. While the regime has benefits, we have seen a wide range of harm across all of the sectors where firms have ARs.
“Where harm occurs, it is often because principals do not undertake adequate due diligence before appointing an AR, and from poor ongoing control and oversight. We consider there is now significant evidence of harm requiring regulatory intervention.”
The FCA’s proposals include requiring principals to provide not only additional but more timely information on their ARs and how they are overseen, as well as clarifying and strengthening both the responsibilities and expectations of principals.
The regulator, which is also seeking views on other potential areas of policy change, has collaborated with HM Treasury on the latter’s call for evidence on how market participants use the AR regime and how effectively it works in practice. The call for evidence also spans possible reforms.
Commenting on the watchdog’s consultation, Movo managing director Lea Cheesbrough said in a statement sent to Insurance Business: “The FCA review is welcomed and is wholly refreshing as the onboarding process has no guidance currently from the FCA. Working with the FCA to address the issue and to have a set of principles in place will be a step to ensuring all customers are treated fairly.
“The issue isn’t just the onboarding, but the level of access deemed appropriate by the principal; by not giving the AR full access to all products, the customer could actually, on many occasions, not be treated fairly as a result. Some principals have certain deals with insurers, but this means placement isn’t always made in the way the AR deems suitable.”
Cheesbrough stressed that it is the AR that holds “that important customer relationship” and would, therefore, be reliant on the principal fully understanding clients’ demands and needs.
“This is why in the Movo network model we allow ARs to deal directly with insurers and we oversee and govern the advice,” she added. “The business is placed in the best market for the client and not for the principal.”
Movo, which from March next year will no longer be part of the Hedron broker network, has 52 AR broker members. In 2022, it expects to raise that number to 75.