A lot has been discussed in the news and on social media since the Financial Conduct Authority (FCA) first announced that they were carrying out a review of ongoing advice services. While the results of the review have yet to be published, there is still a lot we can learn from what has been said and done so far.
It can be a little frustrating trying to track the progress of the FCA’s review of financial advice ongoing services; how it came about, why the FCA is focusing on ongoing advice services in the first place, and where it might be headed. With that in mind, we’ve pulled together all the information that’s been shared so far into one handy, centralised resource.
In this post, we will cover:
- the story so far (why the FCA is focusing on ongoing advice services);
- what was in the FCA’s ongoing advice questionnaire;
- what firms might need to address after the review; and
- what regulatory experts think the ongoing services review will mean for advice firms.
NOTE: If you’re looking for something in particular, click the links above to jump ahead.
The Story So Far…
While the ongoing services review was only announced recently, the regulator’s interest in this area has been building for some time.
2020
On 21st January 2020, the regulator published a ‘Dear CEO’ portfolio strategy letter for financial advisers. In the letter, they shared that ‘consumers are being asked to take more responsibility for an increasing number of complex financial decisions. Financial advisers have a valuable role to play in helping consumers navigate these choices and deliver the right solutions for their needs and objectives.’
They went on to discuss four key ways that consumers of financial advice could be harmed. Among these were ‘receiving unsuitable advice for their needs and objectives’ and ‘paying excessive fees or charges for products and services’. Given more recent comments from the regulator on their concerns that advice firms are not adequately considering the relevance, nature, and costs of ongoing services for all their clients, both points can now be seen as foreshadowing the focus on ongoing advice services.
2021
On 14th September 2021, the FCA published the Consumer Investments: Strategy and Feedback Statement. This 3-year strategy is designed to support a thriving consumer investment market and ensure people can access advice when they want it. We now know that the data gathered from the ongoing service survey and wider review will form a part of that work. The aim of this, the regulator says, is to ‘raise standards so people can invest with confidence’ and ‘have trust in the services on offer’.
2022
In the FCA’s portfolio strategy letter to financial advice firms and intermediaries published in December 2022, they highlighted that consumers might not be receiving value for money for ongoing services. They also shared concerns that advice firms were not adequately considering the relevance, nature, and costs of ongoing services for all their clients. At this time, the regulator indicated that they would undertake some cross-firm work in this area in future.
2023
Another ‘Dear CEO’ letter was published in January 2023 titled ‘Implementing The Consumer Duty In The Consumer Investments Sector’. The letter explained various elements of the Duty and the regulator’s expectations of firms – notably, that firms are expected to act in good faith toward clients, enable and support them in pursuing their financial objectives, and avoid causing them foreseeable harm. In Annex 2 of the letter, they raised the particular concern that ‘some clients of financial advisers may be getting ongoing services that do not meet their needs and/or represent value for money’.
This concern was addressed again in the FCA’s Consumer Duty webinar in December 2023 by Kate Tuckley, Head of Consumer Investments, who said: “A significant area of concern for us, and one in which we are seeing currently poor practice, is that many firms are still charging clients for a service that they are not benefitting from on an ongoing basis.” She added that the FCA was seeing “too many firms providing a service which the client doesn’t actually need” and that the worst example of this is clients paying for annual reviews which aren’t being delivered. Tuckley warned that “there is much work still to be done there”.
2024
The FCA’s focus on ongoing services was crystalised on 15th February 2024, when the regulator announced that they had requested information from around 20 of the industry’s largest firms about ‘the delivery of ongoing services, for which their clients continue to be charged after advice has been given’. The information request, by way of a questionnaire, was made to help them understand what (if any) further regulatory work must be undertaken in this area.
At this stage, the FCA has not said when the results of this review will be published. However, speaking at a KPMG event on 20th February, Sheldon Mills (Executive Director, Consumers and Competition at the FCA) said: “Many firms have already made great progress on the Duty. For example, they are offering the right products and services to the right customers; eradicating jargon and moving clients to less bespoke and cheaper options where that is a better fit.”
It is fair to assume then that all isn’t quite as dim and dangerous as some media reports might suggest. While this review is likely to highlight new areas of improvement, the regulator is already acknowledging the good work of many firms in meeting their expectations and improving client outcomes.
What Did the Ongoing Services Review Survey Ask?
The ongoing advice review questionnaire included three questions. The first two were simple yes or no queries:
- Have you reviewed the delivery of ongoing advice as part of your consumer duty work, in particular when assessing fair value?
- If you did review it, please also confirm if you made any changes?
The third question on the survey required recipient firms to add data to a table for each year from 2017 to 2023, reporting the number of clients due a suitability review as part of your financial advice ongoing service, the number who received a suitability review as part of your financial advice ongoing service, and the number of clients who paid for ongoing advice but whose fee was refunded as the suitability review did not happen.
There was also a notable caveat to question 2, advising recipients that they should be prepared to provide further information to the FCA on that point should they ask for it at a later date.
What Firms Might Need to Address After the Review
We can’t be sure of what new regulation or requirements (if any) the FCA will introduce as a result of their review. However, any new regulation or thematic reviews will likely focus on the way firms assess and demonstrate the value of their ongoing services.
Until the regulator says otherwise, we believe the best thing firms can do is to ensure they are doing what most already are:
- evaluating and prioritising the needs of their clients when recommending products and services;
- ensuring clients have a clear understanding of what they are paying for;
- carrying out regular (annual) suitability reviews;
- seeking to increase engagement from clients who are not making the most of the service(s) they are paying for; and
- keeping clear, written records of all processes, activity, and communications to share with the regulator and streamline internal reviews moving forward.
Expert Insights: What the Ongoing Services Review Means for Advice Firms
The FCA’s focus on ongoing services has raised plenty of questions, with limited answers to date. We know that advisers (and other financial professionals) are keen to get insights and advice from experts on the possible implications of the review, so we are hosting a free educational webinar with regulatory experts Michael Lawrence and Christian Markwick on the 11th April 2024.
“There’s no doubt that the FCA’s work on financial advisers’ ongoing services has caught the attention of the sector. It’s the regulator’s first piece of Consumer Duty-related work on advisers and is likely to be instrumental in revealing (if it wasn’t clear already) how key aspects of the new requirements apply at the advisory coalface.” Michael Lawrence, Principal Consultant at Bovil – formerly of the FCA
In this CPD-accredited webinar, you’ll hear from regulatory and compliance insiders Michael Lawrence and Christian Markwick as they provide candid insights on the implications of the FCA’s focus on ongoing services for the retail investment sector.
You’ll discover the 5 key questions for measuring your firm’s ongoing services against FCA requirements and get practical advice on:
- facilitating optimal delivery of ongoing services in your firm;
- matching ongoing services to client needs and objectives; and
- ensuring your firm’s charges meet the fair value test.
Hosted by our Head of MPS, Ash Weston, the session will round off with a live Q&A where you’ll have the opportunity to get your questions answered by FCA and compliance experts. Register now to secure your place >
Can’t Make It? No Problem
The webinar will begin at 11:00 am, on Thursday 11th April 2024. If you can’t attend the live session, you can still register. We’ll send you a recording after the session to watch at your convenience and share with colleagues.
Learn more about our free, CPD-accredited webinar and register here >
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