The eagerly awaited outcome from the ongoing services review was published on Monday and the outcome was fairly positive, but we know there is more under the surface.  

A summary from the 22 largest financial advice firms found:

• 83% of firms delivered their suitability reviews

• 15% of cases were those where clients declined or did not respond to a firm's offer of a suitability review

• Fewer than 2% of cases there was no effort or evidence that a suitability review was delivered.

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The FCA did, however, highlight that whilst the statistics are positive, there are some limitations to the data set…

• Differences in results across the firms

• Population was not a representative sample of the entire marketplace

• Some data was not readily available

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The FCA recognises that for the 2% of cases where there was no evidence, redress is likely to be due. And similarly for the 15%, whilst redress may be less likely, the FCA is expecting firms to question whether an ongoing service is in the client's best interest if they have not engaged. We know this is an industry wide issue and that firms should set policy for non-respondents, but similarly they should clearly set out to a client from the outset the expectations of the service and the key deliverables (including what you will need from them!)

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Highlighted in the review were some examples of good and poor practice…

Good practice

• Clear client agreements setting out the nature of the service (disclosure)

• Systems and controls to monitor suitability reviews

• Policies to stop fees where disengagement, or non-engagement is persistent

• Quality of reviews considering

• Clients circumstances, objectives, attitude to risk and capacity for loss

• Risk profiles, charges, performance of investments and ensuring the suitability of those. Where suitability has not been maintained, suitable recommendations should be made and documented following standard advice process.  

• Communications being recorded.  

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Poor practice

• Unclear disclosure regarding services

• Ineffective processes to highlight contractual obligations

• Insufficient, or no, management Information highlighting where contractual obligations have not been met.

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Now the review has been conducted, it is clear the direction of travel of the regulator, and this is why we stated to only sigh with relief temporarily. Within the findings, the FCA has highlighted that they will be engaging with the sector across 2025 and will be reviewing their existing rules and guidance with regards to ongoing services. This will likely mean firms will have some interaction with the regulator, be it via supervisory work or surveys.

The FCA is expecting firms to consider their annual review process both now, and reflectively (likely back to 2018) to ensure the regulatory requirements are being met. Where they are not, the FCA expects firms to proactively contact customers to assess if any harms have been caused, and the potential for redress.

We suggest all firms review the FCA’s findings and compare the good and poor practice to their current business approach.  

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