Data collection: Today's proposals digested

The FSA will collect more data from firms after 2012 and monitor their activities to "mitigate the risk of poor consumer outcomes" and make sure they have implemented its adviser charging rules.

A consultation paper, published today, outlines how the FSA plans to do this by making two key changes.

Proposal 1: New RMAR requirements

The FSA proposes to extend the transactional data it currently receives via product sales data (PSD) by collecting extra information from firms via the twice-yearly RMAR forms.

It does not currently collect 'disaggregated' data on adviser remuneration, but, from 2013, it suggests firms break down how much money they bring in via adviser charging, how many clients they have and how they are paying for the firm's services.

It will do this by adding two new sections to the RMAR (section K for adviser charging and section L for consultancy charging) and by making minor changes to section B to reflect its new definitions for independent and restricted advice.

The FSA says it wants to collect this data so it can calculate average adviser charges at the firm, sub-sector and sector level and, ultimately, to be able to identify trends and anomalies in the market that may be harming consumers.

For example, excessive adviser charging may indicate a breach of disclosure rules, that charges are being hidden in some way or that there is a lack of competition in some areas of the market.

Unduly low charges, meanwhile, may indicate that fees are being concealed from the client and reported, perhaps, in section B of the RMAR under 'other fees'. This is against RDR rules.

Separating independent and restricted advice, the FSA proposes firms break down charges received directly from clients, via product providers and via platform service providers. Firms will split this data further into the amount received up front and that received over time for ongoing work.

There are further proposals requiring firms to go into more detail for initial and ongoing charges, including the charge per hour or as a percentage of the client's investment.

The proposed requirements are similarly detailed for GPP work and consultancy charging, but the FSA says it is confident it is not unduly increasing the administrative burden on firms.

Proposal 2: Individual adviser complaints

The FSA wants to identify and remove the 'bad eggs' in the market by developing a risk-based approach to supervising individual advisers.

New complaints will be reported by firms via two of the FSA's existing methods: the Complaints Return Form (CRF) and the FSA's Form D.

The CRF

The twice-yearly CRF currently requires firms to break down complaints into type of firm, products and/or services complained about and the cause of complaint. Now the FSA says it may require firms to break this data down further to the individual adviser level. Against an adviser's Individual Reference Number will be the total of complaints, the percentage upheld and any redress paid.

Form D

The FSA proposes adding a new section ('Complaints Data') to this form, requiring firms to report individual adviser complaints in certain circumstances, such as when there is a claim of £5,000 or more, or when an adviser has been the subject of three complaints or more in any 12 month period.

A new team within the regulator will collect information on individuals, score them in terms of their risk level and investigate 'higher risk' individuals.

The FSA says it understands the data it collects may only indicate a possible issue and that it is aware complaints may be unjustified. It adds it will not make public individual advisers' complaints records.

READ THE FULL 69-PAGE PAPER HERE.

Consultation ends on 8 July. A Policy Statement (final rules) will be published in the second half of this year.