Ensuring that financial advice services are delivered as promised is a key focus for the Financial Conduct Authority (FCA). In 2024, the FCA conducted a review of suitability assessments within ongoing advice services, revealing significant concerns. While many firms demonstrated good practices, others fell short in key areas such as record-keeping, client engagement, and oversight. This article highlights the importance of maintaining up-to-date records and robust processes to ensure compliance with regulatory expectations.
The FCA has published findings from a review conducted in 2024 regarding the advice services that financial advisers provide to consumers[1]. The review was instigated due to FCA concerns that the ongoing advice services consumers receive were, in some cases, not being delivered.
The FCA conducted the review based on information provided by 22 large advice firms – this included suitability reviews as part of their ongoing advice service. Of these firms, 83% conducted reviews, while 15% either did not respond or declined to participate. The remaining 2% had not attempted to conduct a review.
The FCA plans to review the existing rules relating to financial advisers and will engage with the sector this year.
Good practice was demonstrated by firms where:
- Client agreements and consumer communications clearly set out the nature and timing of the ongoing service
- Effective systems and adequate resources ensured suitability reviews were scheduled and offered as agreed
- Policies were in place to stop collecting fees when a client had not engaged with the service for a period of time
- Suitability reviews were provided, ensuring that:
- Clients’ circumstances, objectives and risk appetite were up to date
- Risk profiles, charges and existing investments were reviewed to ensure they remained suitable or to identify whether an alternative recommendation was required
- Communications to clients documented the outcome of a review as a personal recommendation
Poor practice was found in firms where:
- Client contracts did not have a clear description of the services required to enable clients to understand what was to be delivered
- Ineffective processes, controls and monitoring failed to ensure services were delivered and that advice provided met regulatory requirements
- Insufficient management information prevented senior management from having adequate oversight
- Inadequate record-keeping failed to evidence delivery of their services
Key points – firms should:
- Be able to evidence they are delivering the intended contractual services
- Consider proactively contacting clients to assess if any harm was caused
- Ensure appropriate record-keeping requirements are met
- Conduct annual suitability reviews as per MiFID II
- Follow the Consumer Duty rules which require firms to take appropriate action if clients have suffered foreseeable harm as a result of firm inaction
- Consider under the Consumer Duty (PRIN 2A.2.5R) whether redress only in respect of part of the charges levied is appropriate
If this interests you, fscom is happy to assist you in reviewing and assessing your systems and controls to ensure compliance with the FCA Handbook.
These are some of the areas that we can assist you with:
- Client file review (including full life cycle of a client) including client categorisation, suitability, and client communication
- Consumer Duty (including vulnerable customers) review
- SYSC (Senior Management Arrangements, Systems and Controls) review
- Financial promotions review
- Training
Firms must take proactive steps to ensure they are meeting their contractual obligations and regulatory responsibilities. Clear client agreements, effective systems, and thorough record-keeping are essential in demonstrating compliance with FCA requirements. If your firm needs support in reviewing and improving its advice services, fscom can provide expert guidance to help you assess and enhance your systems and controls, ensuring compliance with the FCA Handbook and Consumer Duty obligations.
