The Financial Conduct Authority (FCA) has announced that as of 29 July 2022, it will be regulating the pre-paid funeral plans sector. This means that both funeral plan providers and intermediaries will need to apply for authorisation or become an appointed representative (AR) by this date in order to continue doing business.
The authorisations gateway opens on 1 September 2021 and the FCA have advised firms to submit their applications and supporting documents as early as possible. Failure to submit by 1st November will mean firms are expected to pay a 40% increased fee for their application, so early submission, although challenging, is advised. This article will help you to understand the approach the FCA has taken and plan your next steps.
Why has the FCA chosen to regulate?
One of the FCA's core focuses has always been to support and protect consumers and vulnerable customers. The pre-paid funeral plan sector is no different and the FCA aims to regulate in order to achieve good outcomes for all consumers. This was consulted on in March 2021 is intended to protect consumers who have taken, or will take out, a pre-paid funeral plan product. Funeral plan providers will have to follow new rules when they come under regulation in July 2022, these rules are set to:
- introduce high standards in the funeral plans market
- require firms to ensure that plans are sold fairly, perform as expected and provide value for money
The new rules firms need to abide by once authorised have been outlined in policy statement PS21/8: Regulation of funeral plans - Feedback to CP21/4 and final rules. It is important that firms understand the rules and the FCA has urged all firms engaged in funeral plans activities to consider the policy statement and rules therein before they embark upon their authorisation journey.
Who does this apply to?
Firms in the scope of the new rules and regulatory changes include:
- any firm that sells or carries out funeral plan contracts in the UK
- any investment advisers who provide advice on funeral plan contracts
- any insurance firms that provide life insurance policies backing some funeral plans
- any trustees of trusts and discretionary investment managers who manage the assets of trusts that back some funeral plans
- any trade bodies which represent firms that carry out or sell funeral plan contracts, including those which represent funeral directors
Applying for authorisation is a big step. Funeral planners should be ready to submit their application before November and are advised to consider their application carefully before submission. The process is complex and many firms struggle to successfully navigate the exercise without support. Firms are required to understand the application process and the information the regulators are asking for. They must, also, assess the impact that these demands, and operating under a new regulatory status, will have on their business. This reiterates the FCA's point about ensuring funeral planners have read and, importantly, understood, their policy statement.
In order to build a strong relationship with the regulator, it is important your firm submits an articulate, coherent, and ultimately, complete application. There are many elements to an application, so it's important to understand the whole process and what the regulator is seeking at each stage and in overall terms. You should consider:
- Whether you are ready, willing, and organised?
- Does your firm meet the minimum standards?
- Does your firm have all of the documents and materials ready for submission?
- Has your firm provided the level of detail the regulator is seeking?
- Has your firm provided all of the information that the regulator has requested?
Unfortunately for new applicants, the FCA Business Plan 2021/22 made it clear of the FCA's intent to apply a more intensive assessment of new applications. With application waiting times rising and the FCA noting that they expect their rate of refusal to increase, it is imperative that funeral planners get this right the first time. Many firms will benefit from seeking support from a compliance consultancy such as Compliancy Services. Seeking support can help minimise the burden of your application and help you to get authorised in the fastest possible time. We are aware that many firms will be at different stages in their applications and offer three support services that can be tailored to your firms needs.
How Cosegic can help you
Deciding on your strategy, and how best to execute it, can be tough. Cosegic can assist in a number of different ways:
PREPARE: For a relatively low cost, we can provide a report which assesses your regulatory options, based on your business model and plans. This will include recommendations as to how to progress and identify the resources you will need to have in place to get authorised.
REVIEW: Should you wish to construct your FCA application yourself, we can review it before you submit it. We can also support you in responding to any follow-up questions from the FCA.
FULL SERVICE: We can provide full project management support for your FCA application from start to finish.
We have successfully managed over 1,100 authorisations and know what the FCA is looking for. We can help you to avoid the common pitfalls and delays, getting you authorised in the fastest possible time. For more information and resources to support your application you can visit our dedicated authorisations webpage or contact us to speak with an expert.
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